Let property can generate a useful income stream for a spouse
who has little or no other income to soak up the annual tax free
income allowance, but you do need to arrange the property ownership
correctly to gain the maximum tax advantage.
In England and Wales you can own property as joint tenants when
you hold an equal interest in the whole property, or as tenants
in common where you hold separate and identifiable shares say 10%
and 90% in the property.
When a married couple own property as joint tenants any rental
income must normally be split equally between them for tax purposes.
If the property is held in unequal shares as tenants in common the
couple can make a declaration on the Inland Revenue form 17 to have
the rents taxed in the proportion that they hold the beneficial
interest in the property. Without the form 17 declaration a married
couple will be taxed on an equal share of the net rents from a jointly
If you want to split the rental income in unequal shares instruct
your solicitor to acquire the property as tenants in common. Where
you already own the property as joint tenants it is quite Declare
your simple to change to tenants in interest common, but there can
be a stamp
duty charge where the property is mortgaged. A gift of a share in
a property between husband and wife is not taxed, but when the property
is sold the capital gain must be split according to the proportional
ownership, so think ahead.
If you let a number of properties an alternative solution is to
form a partnership or LLP to collect the rents and allocate the
net income between you. However this does entail some additional
costs. Come and talk to us about your options.