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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I am in the process of buying a flat in joint names

Resolved Question:

Hello
I am in the process of buying a flat in joint names with my wife
The mortgage is around £14k on repayment at £100 per month
The rental income is £275 per month
My wife earns around £6k per annum and I am looking to have the rent come through my wife as she is below the tax threshold
Is this legal or is there a better way to manage this
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

HMRC rule on property income when property is in joint names is and I quote "

If you live together with your spouse or civil partner, we normally treat income from property held in your joint names as if it belonged to you in equal shares and tax each of you on half of the income, regardless of actual ownership."

If you wish this to be taxed on a different basis (known as actual basis) i.e. 60:40; 80:20 etc .etc. then you need to complete a Form17 and also provide evidence in a form of a declaration or deed that your beneficial interests in the property are unequal.

More information on this and a link to download Form 17 is here

https://public-online.hmrc.gov.uk/lc/content/xfaforms/profiles/forms.html?contentRoot=repository:///Applications/SpecPersTax_iForms/1.0/17&template=17.xdp

I am also providing a link to some guidance notes from ACCA here

http://www.accaglobal.com/zm/en/technical-activities/technical-resources-search/2014/october/jointly-owned-property-form-17.html

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

so I am at the 40% my wife is not the £175 profit would be taxed 50/50

me at 40% my wife at 20%

Expert:  taxadvisor.uk replied 2 years ago.

Kevin, thanks for your prompt reply.

Unless you file a Form 17 to apportion rental income/profit on an actual basis, HMRC would treat this income on a 50:50 basis and your income tax would be at your marginal rates.

I hope this is helpful and answers your question.

taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4886
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
taxadvisor.uk and 2 other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 2 years ago.
Kevin, one other consideration to bear in mind on splitting the share on actual basis.

This being an investment property, all gain on sale would be chargeable to CGT.
You are a higher rate taxpayer and may pay CGT at 28% and your wife at 18% if the share is 50:50.

I hope this is helpful.

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