Declaration of trust - splitting rental income

Dear respected Admins I own a sole ownership property outright zero mortgage on my name I would like to split the rental income with my spouse as she's not employed and benifits from lower tax and ofcourse the tax free allowance 1. Once the declaration of trust is produced, does it needs to be registered with HMRC's trust registration service? 2. Does declaration of trust need to be registered with HMRC 3. Do I need to complete form 17 4.trading allowance of £1000 can both couple use it or only 1 person. 5. Is declaration trust the right document if we are only splitting the rental income and does it need to be produced with a solicitor or can I draft one myself. I apologise if any of the questions have already been covered Thanks

Hi,
 

Thank you for your question. Most types of trust giving an interest in property to somebody who is not the legal owner , now need to be registered with HMRC via the Trust Registration Service. Information regarding this can be found at www.gov.uk/guidance/register-a-trust-as-a-trustee. Form 17 is not appropriate . If you jointly own a property , you are each entitled to the property allowance of £1000 : www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income#property  . Guidance on drawing up a deed of trust can be found at www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem9520  . Thank you .

Hi, As a married couple you cannot transfer a right to income without it being classed as a settlement and remaining taxable on the person who made the settlement (you in this instance). You would need to transfer the beneficial ownership in the capital (not only the income) for it to be effective. https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem9923

Hi BellaBoo If I were to transfer the beneficial ownership in a property (capital and income) to my spouse as a percentage share, e.g. 60%-40% rather than a full 100%. Would this also be classed as a settlement and would I be liable for the tax on 100% of any rental income. Thanks