Taxed on 'actual basis' & declaring income

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    Taxed on 'actual basis' & declaring income

    Recently rented out a flat of which I (higher rate taxpayer) own 10% and my wife (basic rate taxpayer) owns 90%. Have completed Form 17 but my question is, when we come to fill in tax return do we declare 50% on my tax return and 50% on my wife's or do we declare the income in 10%/90% proportion?

    Thanks

    #2
    Originally posted by meister View Post
    when we come to fill in tax return do we declare 50% on my tax return and 50% on my wife's or do we declare the income in 10%/90% proportion?
    Unless maybe you are paying the rent income 50:50 into sole accounts owned by you and your wife, why would you think you shouldn't declare the income 10%/90%?

    Comment


      #3
      If your Form 17 was submitted to Tax office on 1st Feb 2015, then your rental income would be apportioned 50% for 10 months and 10% for 2 months if rental started in April 2014.

      Comment


        #4
        For a property jointly owned by spouses, it's 50:50 until a valid Form 17 is in effect, then it's 10:90.

        For sole ownership, it's 100:0 until the DoT, then 10:90 - although there can be problems, if the property is mortgaged.

        Comment


          #5
          Kingmaker does that apply even if the house is owned as Tenants in Common in whatever share?

          Comment


            #6
            It depends on whether the Legal ownership is held jointly or solely.

            Comment


              #7
              Legal ownership will be joint (me and Mr Emwithme - married couple). If we own as Tenants in Common with unequal shares, will that proof of ownership be OK for tax purposes? If we have to file a Form 17 anyway, we may as well buy as Joint Tenants.

              Comment


                #8
                Yes, you should be able to use the LR forms to establish the unequal shares. Then file form 17 within the 60 day Time Limit.

                Comment


                  #9
                  But, just to be clear here... If a married couple own properties as Tenants in Common with unequal shares, recorded as such in deeds of trust (on file but never submitted to HMRC), and have declared the rental income in the appropriate proportions for years, are they potentially screwed if they have never filed this Form 17?

                  Comment


                    #10
                    For Form 17 the relevant steps are :

                    1. Are the co-owners married/civil partners? If not, Form 17 is not relevant.

                    2. Are the co-owners the Legal owners? If only one spouse is the Legal owner, Form 17 is not relevant. A DoT is needed to alter the 100% split.

                    3.If the married couple are joint Legal owners, the rental profit is automatically split 50:50.

                    4. If the married joint Legal owners want any other rental split than 50:50, a DoT (Declaration of Trust) is needed AND Form 17 must be submitted to HMRC within 60 days.

                    5. The only other option for married joint Legal owners is to have a DoT for a split of (say) 99:1 and NOT complete a Form 17. If so, the income split REMAINS 50:50.

                    However, it is important to review the CGT and SDLT positions and continuing deductibility of interest for mortgaged properties.

                    Comment


                      #11
                      Sorry if I'm being stupid (but I was once told the only stupid question is the one you don't ask)...

                      Does it make a difference if the house is owned as Joint Tenants (so automatically assumed to be a 50:50 split) or as Tenants in Common (with a differently designated split)?

                      Mr Emwithme is working, I am not. I will do 90% of the "work" for the BTL property (and have done at least 90% of the "finding"). Our initial plan was to hold the BTL as Tenants in Common (90:10) but we have to file a Form 17 anyway we may as well hold it as Joint Tenants (for ease of future transferability of tax liability)?

                      Comment


                        #12
                        emwithme,

                        The only thing you have to worry about with Joint Tenants v Tenants in Common is:

                        Joint tenants - automatically on your death, your 50% goes to the surviving tenant. If you have tenants in common, you can both leave your share of the property to who ever you want in your Will. You still need to do the Form 17 regardless of joint or tenants in common if you want to vary the split in percentages.

                        Comment


                          #13
                          wonderful, fabulous, thank you.

                          We'll hold them as JTs then, just makes it easier (even though wills are sorted) for future purposes.

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