Rental income transfer to my wife

Hi, I own a property with ongoing mortgage. I met my wife after purchasing the property. I work and pay income tax from my regular salary. On top of that I pay additional tax for the rental income. My wife doesn’t work at the minute. I pay for all her expenses. Wanted to know if I can transfer all or part of the rental income to my wife name even if the property is in my name not in joint name? Thanks

Hi Ih1985,

As you have stated that you actually solely own the property the starting point is that 'whoever has beneficial ownership of the property has beneficial ownership of the income'.
Please refer to the guidance held at:
TSEM9160 - Ownership and income tax: legal background: ownership - income follows property
Due to the fact that the property is not held 'in joint names' then you would not have to make a formal Form 17 election.
Please therefore refer to the following guidance in respect of  making a declaration of trust (to declare your own and your wifes beneficial interests in the property).
This would then enable you to transfer all/part of the rental income to your wife.
TSEM9520 - Ownership and income tax: express trusts - written declaration

Thank you.

Do I need to submit declaration of trust or deed of assignment to HMRC?

Hi James Leung
Thank you for your question.
There are two rules about property held jointly by married couples and civil partners:
1.the 50/50 rule whereby most income from jointly held property is treated as split equally between the two spouses or civil partners for income tax purposes.
2.the form 17 rule wherby, if the true income split is different from 50/50, the couple can opt to be taxed on that basis for income tax purposes.
See:
Property held jointly by married couples or civil partners: Overview: two main rules
Where married couples or civil partners elect not to be taxed 50/50 then the couple should submit evidence of beneficial ownership (e.g. declaration of trust) along with the form 17 to HMRC.
See :
Property held jointly by married couples or civil partners: Form 17 rule - evidence
Thankyou.
Regards.

Dear HMRC, With reference to your comment of "making a declaration of trust", is this a written declaration, i.e a simple written document, which the beneficiary of the rental income can declare the rental income under her own self assessment return instead of her husband's who is the owner of the property? Also is " Declaration Of Trust" a formal process of setting up a trust, having the property/asset to be transferred into the trust and A Trust return will need to be submitted? If this does not required a formal trust to be set up, can this also be applicable for a property owned by son or daughter, but transfer all the rental income to his/her parents, then parents will delcare the rental income under their self assessment return?

Hi Susan Wong
Thank you for your question.
The declaration of trust does need to be a written document.
The following guidance gives further information.
Ownership and income tax
I would also refer you to the following guidance if you are only transferring the income to your wife as the settlements legislation may apply. Settlements legislation
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’s also more information about what type of trusts need to be registered at :
Types of trust that need to be registered

Dear HMRC, Thank you for the explanation provided above. I am currently the sole owner of a property and would like to transfer all the rental income to my wife. To ensure that I understand the process correctly, I would appreciate your review of the following steps: Step 1: Following your guidance on creating a declaration of trust (TESM9520), I intend to personally draft the Declaration of Bare Trust, which will include the following statement: "I, John (name), hold the property located at (address of the property) in trust for my wife, Mrs. (name), absolutely." Step 2: Once the declaration is drafted, I will sign the declaration of bare trust to validate its legal effect. Step 3: I will provide a copy of the declaration to my accountant for their records. Step 4: In accordance with the declaration, my accountant will declare 100% of the rental income under my wife's self-assessment return, as she will be the designated recipient of the rental income, despite my ownership of the property. I have two questions for clarification. Firstly, can I transfer all of the rental income to my wife after completing the above steps? Secondly, with regard to the drafting and witnessing of the Declaration of Bare Trust, could you please advise me that should I have to engage a lawyer for this purpose, or if I can proceed with my own drafted version and I can sign it without the lawyer's witnessing? Thank you for your attention to this matter.

Hi,
 

Thank you for your question. It is not known whether your property was initially jointly owned. If so, you could opt to agree unequal shares i.e 100% to wife of income arising from property by completing a Form 17. In addition a bare trust relates to transfer of an asset i.e house not income.and any transfer of the asset has to be dealt with via Land Registry You need only obtain a witness signature if you agree a unequal share arrangement via Form17 (see HMRC) .     Thank you.

Thank you for your response. The property is solely owned by me, and it is not jointly owned. In this particular scenario, I would like to inquire whether it is possible to transfer the entire rental income to my wife without transferring of the asset which requires registration with the Land Registry. If such a possibility exists, I kindly request your guidance on the correct procedure to follow. Thank you and best regards.

Hi John2023,
Thank you for your question.
You will need to send us a valid declaration of trust clearly stating your intentions and the percentage you wish to transfer.
A declaration of trust is usually a statement by the legal owner of property that you would like sombody else to hold the beneficial interest.
I have attached the full guidance from the Trust,Settlements & Estates manual which should help: 
TSEM9520 - Ownership and income tax: express trusts - written declaration
Thank you. 

I am in a similar position to John 2023 but own a rental property 50/50 with my wife as tenants in common. I have read the suggested wording in your guidance. In my case I wish to declare that "I hold my 50% interest in the property described as xxxxxxxxxxxxx in trust for my wife, nnnnnnnnnn." Can I presume that is satisfactory for you? If circumstances change, can the declaration be revoked or cancelled with a further declaration to that effect? Does a declaration of trust also transfer the beneficial interest in the capital value of the property, for CGT purposes, just as it transfers the rental income for income tax purposes, or does that require a legal transfer at the Land Registry?

Dear HMRC Admin 25, Thank you for your response. As per your response and the full guidance from the trust. I have prepared a declaration of trust, and I would greatly appreciate your guidance on whether it meets your requirements. "I, [Your Name], hereby declare that I intend to create a trust to transfer the entire rental income generated by the property described as [Property Description]to my wife, [Wife's Name], without the transfer of legal ownership. By making this declaration, I acknowledge that [Wife's Name] is entitled to any income derived from the property. This is a bare trust, no conditions or restrictions are attached to the transfer of beneficial interest. I understand that this declaration does not require registration with the Land Registry, nor does it necessitate the delivery or witness of signatures. The trust becomes enforceable from the date of this declaration." Additionally, I would like to inquire about the timing and method to submit the declaration of trust to your office. would you please kindly advise on the preferred method of submission? Thank you and best regards.

Hi Beyondourken Anon

HMRC will always assume that joint property is owned in a 50/50 split.

If you wish to amend the beneficial interest you will need to submit form 17 signed by yourself and your wife showing an unequal split. We will need to see a valid declaration of trust as evidence.

If any situation changes, you should again submit form 17 with another declaration of trust to make the previous one invalid. A valid declaration of trust will show for capital gains purposes evidence of the actual beneficial split of interest in calculating capital gains liability. Without this information HMRC will regard any future sale as 50/50. You can see guidance here:

CG70230 - Land: legal and beneficial interests in land

Thank you.

Hi , I currently own a flat solely in the uk , no mortgage and want to rent this out , me and my wife live in Scotland for my work and I am a higher tax payer there , my wife does not work so I would like her to do the letting and have all the income from it This would be around the £600 mark a month so below the taxable threshold for her What do we need to do to achieve this ? Thanks

Hi John2023
Thank you for your question.
This declaration is sufficient provided it is signed by witnesses and dated and should be submitted by mail with Form 17.
May I also highly recommend that you read the guidance on Form 17 from our .GOV website to ensure all criteria is met. 

Hi, I am trying to do the same as John2023, I am the sole owner of a property which I want to transfer 50% of the rental income to my husband. The wording I have for my declaration of trust is I, [Your Name], hereby declare that I intend to create a trust to transfer the 50% of rental income generated by the property described as [Property Description]to my husband, [Husbands Name], without the transfer of legal ownership. By making this declaration, I acknowledge that [Husbands Name] is entitled to 50% of any income derived from the property. This is a bare trust, no conditions or restrictions are attached to the transfer of beneficial interest. We both would sign this and have two witness signatures. I would then register this with HMRC. If I'm correct your answer to John2023 suggests that this is correct, however you also state that this should be submitted with form 17 - I was under the impression that form 17 was only applicable to jointly owned property. Can you please clarify?

Hi Anita1967,

In relation to your question, the previous response given would be correct in that the wording used would suffice when setting up a declaration of trust.
I would advise that as you are the sole owner of the property, the Form 17 would not be appropriate as this would only be used if the property was jointly owned.
Further guidance on the Form 17 can be found here: Declare beneficial interests in joint property and income.

Thank you.

Hi workscat broughton,

In relation to your question, the previous response given would be correct in that the wording used would suffice when setting up a declaration of trust.
I would advise that as you are the sole owner of the property, the Form 17 would not be appropriate as this would only be used if the property was jointly owned.
Further guidance on the Form 17 can be found here: Declare beneficial interests in joint property and income.

Thank you.

I am not a lawyer but, in answer to Anita 1967, my understanding was that it is the beneficial Interest in the property that is declared to be held in trust, not the beneficial interest in the income. The income follows the beneficial interest in the property ; the right to receive the rent is a “benefit” that comes with the property.

@Beyondourken Anon I'm not a lawyer either but I agree as I'm pretty sure a declaration only transferring the right to rental income is going to be ineffective for tax purposes due to settlements (HMRC Admin 10 linked it in a previous reply) Just to try help make it a bit clearer for people. 1. If there is a mortgage you will probably need your lender's consent for any disposal (of your interests in the property to your spouse). 2. You cannot just transfer the rental income if you want it to be effective for tax purposes. You must also transfer the beneficial ownership of the property. 3. You may need to consider the impact on any tenancy agreement or any other legal agreement (energy supplier, repair or maintenance contracts maybe) and also expenses incurred due to the tenancy. You can assign a right but not an obligation. Which means just because your spouse is entitled to the rental income does not mean they are responsible for the rental costs or that they are incurring any rental costs. The tenancy agreement may need to be changed to account for any change in ownership. 4. If your spouse assumes responsibility for mortgage payments then this counts as consideration for SDLT purposes. In short, I would caution other users that they may want to consider engaging a professional and you may need both legal and accounting professionals. The tax treatment is influenced by the legal position which accountants may not be aware of (such as what I said above about being able to assign a right but not an obligation) when the law behind it isn't actually tax law.