Rental income transfer to wife

Hi, I'm the sole owner of a BTL property with mortgage, I recently got married and would like to assign 100% of the rental income to my wife. Just want some clarification on doing taxes properly: 1. As I'm the sole owner, we only have a deed of assignment in place, do we need to submit this to HMRC? (some answers in this forum contradicts to each other) 2. I pay mortgage/ service charge etc. from my bank account, but can my wife claims these when doing her tax return as she is assigned 100%? Or does she have to be the one making the payment? 3. My agent collects rent and pays to my bank, with all invoices in my name. Do I then transfer rent to her bank, or does it need to be paid to her directly? Thank you.

Hi,

You will need to change the beneficial ownership of the property through a Declaration of Trust. You can see guidance here:

TSEM9150 - Ownership and income tax: legal background: ownership: legal and beneficial ownership - separation

A Declaration of Trust is a legally binding document that creates a trust. Most types of trusts 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. You can find guidance on the registration requirements and how to register here:

Register a trust as a trustee

There is also more information about what type of trusts need to be registered here:

TRSM23050 - Types of trust that need to be registered: contents: excluded express trusts: contents: property ownership

In order to claim the relief your wife will need to pay the mortgage service charge.

We would also confirm that the payments of the rental income need to be paid directly to your wife.

Thank you.

 

Hi HMRC Admin 19, Thank you for the info for my question 1. Regarding to: 2. Mortgage interest relief - because I own the property I pay the mortgage. Does it mean by assigning 100% to my wife, she cannot claim the 20% interest? - I'm double checking here as this contradicts to another post where an admin says interest relief can be claimed according to assigned proportion. 3. Rental is collected by my agent, as I am the home owner, I am the landlord on their system. Do you mean I need to ask my agent to pay the rent and invoice to my wife directly? - Again just double checking, in a previous post. an admin said as long as the rent is transferred to wife at the end of the day, it is fine.

I am in the same position as you, however I don't use an agency but the tenant pays me directly. my question is if I was going to transfer 80% of the rental income to my wife, how would I receive the remaining 20%? would wife have to do a transfer to my account, or does the tenant need to perform two payments? And is there any particular format the Deceleration of Trust letter needs to be? thanks

Hi,
Thank you for your question.  
I should first clarify that a Deed of Trust is not just for Income Tax purposes it's a legal document so if you assign 100% of the property to your wife by Deed of Trust she then becomes the legal owner not just of the income from the property but also of the property itself you are no longer the owner.  
If you then continued to pay the mortgage that is a matter of personal choice but if your wife is not paying the interest then she cannot claim for it against her income from the property as she isn't incurring the expenditure.
Thank you.

Thanks, just to confirm; say I decide to transfer 99% of the rental income to my wife I would need to create: 1. Declaration of trust? 2. Do I need to register a trustee at gov hmrc? 3. Do I need to send the declaration of trust anywhere? Thanks

Hi HMRC Admin 8, Just to clarify in my case, I am going to have a 'Deed of Assignment' rather than 'Deed of Trust', because I'm only going to sign beneficial interest of this house to my wife, not the ownership. In this case could you re-consider my questions please: 1. As I'm the sole owner, we only have a deed of assignment in place, do we need to submit this to HMRC? (some answers in this forum contradicts to each other) 2. I pay mortgage/ service charge etc. from my bank account, but can my wife claims these when doing her tax return as she is assigned 100%? Or does she have to be the one making the payment? 3. My agent collects rent and pays to my bank, with all invoices in my name. Do I then transfer rent to her bank, or does it need to be paid to her directly? Thank you.

@CC5678 I'm not hmrc admin but from your latest reply I just wanted to clarify something. If you transfer beneficial interest of the property, you are transferring ownership. Beneficial interest is the right to any benefit from the asset...such as rental income or proceeds from selling the property. The beneficial owner is the real owner. The legal owner is just the person named on the paperwork. Where these are different, it means the legal owner is holding the property for the benefit of the beneficial owner (so the legal owner doesn't really own it). Basic rule of any expense is you must actually incur the expense to be able to claim it for tax purposes. If your wife assumes liability for the mortgage payments, SDLT will be due. My advice would be to seek both legal and tax advice, so you're aware of both the legal and tax implications. Especially where considerable sums could be at issue.

Hi besart k,

In relation to transferring 80% of the rental income to your wife and putting a declaration of trust in place, the transfer of funds would be a personal agreement between yourselves, with HMRC only requiring to be notified of the total income and any expenses incurred based on that split, in this case 80/20.

In terms of particular formatting to the declaration of trust, you can see information here:

TSEM9520 - Ownership and income tax: express trusts - written declaration

Thank you.

 I see, thanks for the advice! Also @Admin 19, if I were to transfer 99% to my wife, does it mean it then becomes a personal agreement and the mortgage interests t can be claimed according to the split?

Hi,

As explained in the previous response, if you were to transfer 99% of the property to your wife, she would then be the legal owner of 99% of the property, with the remaining 1% in your name. With this in mind, it would become a legal agreement and HMRC would expect that as you are incurring the expense of the mortgage payments, that this would be reflected in claiming mortgage interest as well. 

Thank you.

Hi besart k,
The guidance at:
TSEM9812, advises that property held jointly by married couples and civil partners is split 50/50, unless there is a valid declaration on form 17,
to split the income, based on their actual entitlement,
see TSEM9842 - Property held jointly by married couples or civil partners: Form 17 rule: introduction
Thank you.

Can someone please help me! My husband owed his property which is now rented, fully managed & all costs including mortgage are paid for by me. I also claim for it on my Self Assessment. I've previously been advised that as the property is not held in joint names no form 17 was required. He's now become unemployed & I want to transfer it back to him to manage. What form do I need to fill out and how to I remove this from my self assessment?

Hi Minky,
Thank you for your question
You are correct, if the property is owned entirely by your husband, then a form 17 would not apply as joint ownership is required
In this case, I would advise in order to revert the property back to your Husband, to complete a Deed of Trust declaring they have the beneficial interest in the property.
Please be aware, by completing the Deed of Trust relating to rental income, HMRC expect that this follows reality, so if all expenses including mortgage payments are incurred by yourself, your Husband would not be able to claim these as expenses as he has not incurred such costs.
Thank you. 

im in the same boat i have a rental property. i own the house soley and my name is on the mortgage soley which i would like to stay that way. if i get a declaration of trust 99% in my wifes name and 1% to me. if the rent gets paid into a joint, an account in both our names, which is the same account that the mortgage comes out of, is this ok? as the account is in both of our names and direct debit that is suffcient proof that one of us.. whoever is needed to, in this situation, is paying the mortgage - if the mortgage is not in her name i presume she cant claim the interest? (im at peace with this if this is the case) in this situation, would there be any stamp duty? but also a question to the people who are also in the same boat, would this affect the mortgage when remortgaging??... i need to keep the mortgage soley in my name, im hoping the mortgage lenders need not get involved and are satisfied as long as the mortgage is being paid! many thanks

Hi,
Legal and beneficial ownership can be separate entities for rental purposes.
It would be acceptable if the monies were paid into a joint bank account as HMRC will recognise the beneficial ownership split from a valid declaration of trust.
You are correct with regards to the mortgage interest. The person who holds the mortgage can only claim the interest portion as a residential finance cost.  
Stamp duty is not dealt with on this forum. You should call their helpline on 0300 200 3510.
I have attached a copy of the stamp duty manual below, this  may answer your question without calling their helpline.
HMRC cannot comment on remortgaging. You will need to obtain legal advice on that matter.
Links below to your questions should help:
TSEM9800
Stamp Duty Land Tax Manual
Thankyou.

Hi, I have a similar situation to those above; however, I simply want to be certain I fully understand what’s possible and what’s not. Situation: • I have a property and a mortgage under my name. • Having recently married, I would like to transfer 50% of the rental income to my spouse. I understand I can do this through a Deed of Assignment, thereby assigning her a 50% Beneficial Interest. • The mortgage is paid out of a joint account, meaning she effectively contributes to 50% of the mortgage payments. My question: • Can my wife benefit from the 20% Cost of Finance reduction to her tax for her contribution to the mortgage via of our joint account, even though the mortgage is currently under my name alone? She is after all incurring the expense as evidenced by our equal contribution to the joint account from which the mortgage payments are paid out of. Thank you for your time.

Hi ,
 

Thank you for your question you will need to draw up a deed of trust to transfer the beneficial inteerest to your wife .  The residential finance cost relief can also be covered under the deed of trust  . Thank you .

Hi HMRC Admin 17, Thank you for your reply. Regarding the matter of my wife benefiting from any Finance Cost relief if I were to transfer beneficial ownership over to her: When you mention that this can be covered under a deed of trust arrangement, is the implication that outside of deed of trust arrangement, HMRC would not recognize my spouse’s claim to finance cost relief in relation to her contribution to the residential mortgage under my sole name? As a reminder, she currently contributes 50% to the mortgage through a joint bank account. In other words, is it insufficient for HMRC to allow my spouse to claim a Finance Cost relief (of 20%) against any beneficial ownership she maintains solely based on evidence of payout from a joint account with equal contributions? Is the only way to incorporate the Finance Cost as part of the deed of trust arrangement? Thank you.

Hi,

Rebuilding, whether forced on the customer or voluntarily undertaken, is capital expenditure and the whole cost cannot be deducted in computing profits. Only the actual cost of normal revenue repairs to a part of the old building that is preserved in the rebuilt structure is allowable as an ordinary revenue business expense. But capital expenditure may instead qualify in certain cases for capital allowances. You can see guidance here:

CA11101 - General: claims: types of capital allowance

Thank you.