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TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 17635
Experience:  International tax
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My wife and daughter bought a property 4 years ago along with a friend and his daugh

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My wife and daughter bought a property 4 years ago along with a friend and his daughter (thus 4 persons owning it jointly on the land registry) so that the children can stay in it while studying at university. The mortgage is paid by my wife and the friend (since the children have no significant income). Last year my daughter moved out of the property and so my wife and daughter rented out their part of the property. The rental income goes into my wife's account as she is paying the mortgage.
My daughter has just a few hundred pounds income (per year) and so is not a tax payer. My wife is a tax payer and she files tax returns.
How should my wife account for this rental income ? Should she only account for her portion or my daughter's as well (note that my daughter is not paying the mortgage) ?
Thanks for your reply.
HelloWhere property is owned jointly with one or more other persons the way the rental income is taxed depends on whether the letting is carried on in partnership.Where there is no partnership (as in the case of your wife and daughter), the share of any profit or loss arising from jointly owned property will normally be the same as the share owned in the property being let. But joint owners can agree a different division of profits and losses and so occasionally the share of the profits or losses will be different from the share in the property. The share for tax purposes must be the same as the share actually agreed.Your wife could claim all if she and your daughter agree especially if your wife is receiving all the rental income.
Customer: replied 2 years ago.
Thanks for the reply. My wife and daughter have equal ownership and they have no plans to change that. Do the tax rules have any bearing on who pays the mortgage and who receives the income (when it comes to filling the returns) ? My wife is receiving the full rent for ease of management and paying out the expenses and also since she has been paying the mortgage.
Then your wife should claim the rental in total.The ownership would not change just because they decide your wife would claim all.A different division of profits and losses and the share of the profits or losses will be different from the share in the property.Only the interest part of the mortgage payment can be treated as an expense when working out your wife's rental profit or loss for tax purposes.
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Customer: replied 2 years ago.
Just one final clarification. Ideally, my wife wouldn't not want to claim the full rental as this would mean she will have to pay more tax. What does she need to do it if she only wants to claim only her portion ? Also I assume property maintenance expenses are legitimate expenses when it comes to working out the tax.