Scotland - Transfer Property Income to Wife

I am employed (PAYE) Scottish tax payer with income ca. £40,000. In addition I have two rental properties in sole name with mortgage on both in my sole name. The income from both is ca £10,000. I am married and my wife is also employed (PAYE) with income ca.£30,000. I would like to transfer income from rental to my wife so she can put this in her Self Assessment as her income and pay tax in lower band (20%) rather me 40%. Please advise step by step process I should follow as I have found contradicting information on this forum. When I phoned, I was referred to speak to solicitor instead. I would like to transfer profit from the whole tax year 2023-2024.

Hi
You would need to make your wife the beneficial owner of the income from the rental and you would need to do this in writing by submitting a declaration of trust/trust deed. This needs to be signed by both you and your wife and also needs to be witnessed by an independant 3rd party. The declaration must state the address of the properties concerned and the split of beneficial ownership. The claim cannot be applied retrospectively and you should contine to declare the 100% income yourself until you are notified otherwise. The details should be sent to HMRC, PAYE & Self Assessment BX9 1AS.

Also in Scotland. Wife has no pension and i am +40k so would like to transfer rental income from three properties to her. Following Declaration of Trust submission how does HMR give you formal acceptance ..?? Presume this is required before you can proceed..??

Hi,
If you jointly own property with your spouse or civil partner and want to change the split of rental income received for tax purposes, you should complete Income Tax Form 17.
Declare beneficial interests in joint property and income 
Thank you.

Hi not HMRC Admin but it is not possible to separate the legal & beneficial ownership in Scotland. Scottish law doesn't recognise the concept so it isn't possible, full stop. However I'd also point out that you cannot just transfer the income to a spouse, even in England. You'd need to transfer the capital as well due to settlement rules around gifts to spouses that are a right to income. https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4205 You'll need your lenders agreement to transfer any interest in the property as any property needs to pass unencumbered. Your spouse won't be able to claim relief on the interest paid if the mortgage is in your name. If they assume any liability for the mortgage then that counts as consideration for SDLT & LBTT purposes.

Thanks for your input BellaBoo There are no mortgages on the three properties which are in my name. If DoT is not recognized under Scottish law i presume the only option is to transfer ownership of the properties to my wife ... as cost effectively as possible..???