Newby Tax inquiry

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    Newby Tax inquiry

    We are planning on letting out our house and buying a new property. I am a higher rate tax payer but my wife is not. A colleague at work said I should use my wifes (lower) tax liability by getting the rent paid to her. Can this be done, it sounds a bit illegal, if not is it common practice?

    Many thanks in advance.

    #2
    Talk to a solicitor.

    You can buy the property together as tenants in common (assuming that works for any lending).
    You can either assign the proportions of ownership then (which is inflexible) or then get a deed of trust which allocates the ownership as you wish (say 1% you, 99% your wife).
    You send a notification to HMRC (form 17) and that's all good.

    Not illegal, very common.

    You want to talk it through with an accountant, because you might find the proportions should be fine tuned.
    For example some of the costs of preparing the property for rent are (generally) allowable against tax, which is worth more to you as a higher rate tax payer than to your wife.
    So a bit of modelling might be necessary.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Many thanks.
      Is there any potential problems, I mean if we split up, am I screwed?

      Comment


        #4
        Yes, there would be issues if you split up.
        Because you would have to make the assumption that your wife would then not agree to end the deed of trust and want her share of the sales proceeds as per the deed.

        Hence the need for legal advice.
        If your wife has been helping pay for the property in any way, she would have a claim to beneficial ownership in a divorce anyway, so your solicitor might advise a split consistent with that.

        Talk to an accountant first anyway, the timing of things can be important and it might be better done in a year's time than now (it depends on a lot of factors).
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          Many thanks

          Comment

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