We are a Forces family and have been posted abroad, so we are letting our family residence. Our house is in my name only, purchased after we married but the mortgage we could get was better in my name rather than both. I have two questions: (1) are any tax reductions applicable to our specific situation; and (2) can my wife, who currently is not employed but manages the property, claim the income from the property on a self-assessment, or would I have to set up a business to pay her? 

Arthur Weller replies:  

In HMRC’s Capital Gains Manual at CG64555, it is explained that since you are in 'job-related accommodation' (see where it talks about serving in the Armed Forces), you are deemed to be occupying your family residence for the purpose of calculating principal private residence relief. Regarding employing your wife, this is possible, but according to HMRC’s Property Income Manual at PIM2210: (a) you can only pay her a commercial wage (i.e., what you would pay a third party), and (b) she must declare her wages as taxable income.