This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our privacy notice.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Marketing

A bit of data which remembers the affiliate who forwarded a user to our site and recognises orders from those who become customers through that affiliate.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Joint Spouse/Civil Partnership Ownership (2)
If one spouse/civil partner owns a rental property solely in their own name but is a higher or additional rate taxpayer and the other spouse/civil partner is not, it would be beneficial for at least some of the rental profit to be taxed on the spouse/civil partner. 

To alter the income tax percentage charged, ownership of part of the property must be transferred into the other spouse/civil partner’s name.
Should the owning spouse/civil partner not wish to transfer any material percentage ownership but still wish to reduce their tax bill, a nominal amount of, say, 1% could be transferred. 

In this instance the HMRC Form 17 ‘Declaration of beneficial interest in joint property and income’ must not be signed because not signing will ensure that the underlying property ownership is (say) 99:1 but the income split is 50:50.

Example:
Andrew and Anne are married. Andrew owns a property yielding £8,000 rental income annually. Andrew is a 45% additional rate taxpayer and Anne is a non-taxpayer.
 
Andrew transfers 1% of the property ownership to Anne, retaining 99%. 
Not submitting a form 17 will ensure that each is  taxed on 50% of the income. 

As Anne is a non-taxpayer, this transfer of 1% will produce a tax saving of £1,800 (50% x £4,000 x 45%).

This tip was first printed in Property Tax Insider in November 2016.

Tax Insider Lite

FREE tax strategies delivered to your inbox every month.

  • By clicking on the button below you agree to the terms & conditions and the privacy notice of the website.
  • Subscribe for FREE