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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5143
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Hello, I hope you can advise about my first tax return for

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Hello, I hope you can advise about my first tax return for a buy to let property.
In 2013 my wife and I relocated in the UK for her new job. We completed a buy to let mortgage (the mortgage is in both our names) and rented out our property in London through a management company, (we are both named as landlords). I gave up work to look after the family and I have had no employment since.
I maintain the basic administration of the property and I’m completing my first tax return. The income minus management fees and maintenance costs is £14,790.00.
The self-assessment ‘UK Property Details’ section asks about joint income which indicates that the tax will be split between me and my wife. I have no income and would therefore expect to pay very little but my wife’s salary of £66,800 (before tax) places her in the higher rate. We are worried that her portion will be taxed at her higher rate resulting in very large bill for her share.
Is this a probability and if so there any way of mitigating against this?
There appears to be a clause through completion of an additional ‘form 17 – declaration of beneficial interests in joint property and income’ – Would this allow us to partition our rental income for tax purposes?
Thank you

Hello and welcome to the site. Thank you for your question.

You are right in your understanding that where the property is owned in joint names then both partners enjoy the income and gain jointly. HMRC views this as in equal share, in the absence of other proof.

As matters stand, you would both have to declare your respective share of the net profit from property income when filing your tax returns. There is a provision whereby you can opt for declaration based on actual basis. The process for it is by completing HMRC Form 17 as you are already identified.

Once the completed form has been submitted to HMRC with evidence to support actual beneficial interest in other than 50:50 basis you would then declare both your share of income and gain on that basis.

You can download Form 17 here

You say you have no income. Your share of profit would therefore carry no tax charge. Your wife would pay income tax at 40% on her share (14,800/2 = £7,400) amounting to £2,960.

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 3 years ago.

Thank you for your reply.

Ref Form P17

Is there a method by which my wife could transfer all of or the majority proportion of the house to me to enable completion of Form P 17? (I imagine this would need to be for next tax year now.)

Is this possible or advisable and are there any potential tax penalties eg Capital gains tax?

Thank you

XXXX, thank you fo ryour reply.

Your wife could transfer her share of beneficial interest in the property to you by signing a declaration or a deed. IT would be helpful if this document is witnessed by an independent person e.g a solicitor and the title deed is amended to reflect change of ownership.

Potential capital gains tax..
The transfer of ownership will in itself not give rise to capital gains tax as transfers between spouses are tax neutral, i.e. no gain or loss - the transfer is deemed at initial cost.

When you come to selling the property, bear in mind you will be able to claim one lot of gains allowance only as opposed to 2 at present,as there would be one owner then.

Prima facie, there would be a case to transfer to save on higher rate of tax for both income tax and capital gains tax purposes.

I hope this is helpful.

Customer: replied 3 years ago.

Thank you very much

I have one last query regarding this. Would this arrangement only be possible for next tax year?

Thank you

XXXX, thank you for your reply.

Frankly speaking, you can not do anything for last tax year.
You could do the transfer now make it effective for current tax year 2014-15.

I hope this is helpful. and other Tax Specialists are ready to help you

I thank you for accepting my answer.

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Best wishes.