Tenants in common and income tax

[Kellis]

If we elect to own our property as Tenants in Common with a split of 90% to me (lower rate tax payer) and 10% to my husband (higher rate tax payer) would the profits from letting be split in the same proportion? By doing this would there be any impact on CGT further down the line?

Thanks.

[Tax Accountant]

If we elect to own our property as Tenants in Common with a split of 90% to me (lower rate tax payer) and 10% to my husband (higher rate tax payer) would the profits from letting be split in the same proportion? By doing this would there be any impact on CGT further down the line?

Thanks.

Rent profits and CGT gains are always apportioned between the owners in the shares in which they own the property. Jointly owned properties by married couples are always assumed to be held and assessed equally unless the inland revenue is notified otherwise on form 15.

If you proceed with this, you should notify the Inland Revenue on form 15, and also complete your respective self-assessment tax returns accordingly.

Transfers between spouses are exempt from CGT.

If the sharing % remains 90/10 at the date of the sale, gains will also be shared 90/10. Whether this is better or not will depend on both persons tax circumstances in the year of disposal, the gain on the property in question and the allowances and reliefs available to each one of you.

If the property in question was also the only or main residence for both of you at some time in your ownership, you would both be entitled to lettings relief of upto £40,000 each in addition to taper relief and annual exemption. It may be that your husband's 10% share of the gain is not much and may therefore result in wastage of some of the reliefs and allowances which would have otherwise soaked up some more of the gains assessed to you.

You are of course able to rearrange the shares at a later date but this should not be pre-ordained. You should also address possible marital difficulties in the furure whereby you may refuse to transfer it back to 50/50.

Ramnik

[MrWoof]

You should also address possible marital difficulties in the furure whereby you may refuse to transfer it back to 50/50.

RamnikThats more important than you may think, how many marriages/partnerships go the distance? I believe the figure is less than a third. Let your heads rule your hearts. BTL is a business investment, treat it as such.

[Tax Accountant]

Originally Posted by Karongo
You should also address possible marital difficulties in the furure whereby you may refuse to transfer it back to 50/50.

Ramnik


Thats more important than you may think, how many marriages/partnerships go the distance? I believe the figure is less than a third. Let your heads rule your hearts. BTL is a business investment, treat it as such.

Having posted the original caveat about possible marriage difficulties, I should also add that the present laws on the division of properties on marriage break- downs may ultimately have the same result regardless of in whose name the properties are held.

It is best to take each case on its merits. The persons concerned should themselves address the issues, including possible marriage break-downs, and decide whether or not to follow the possible tax-saving opportunities.

Ramnik