Rental Income
I have two rental queries and would be very grateful for some opinions on the best way to proceed.
1. Someone who pays 40% tax is married to someone who pays 20% tax (£36k pa). Their rental income of £10k for 2009-2010 is split 50/50. I think it's too late to do anything for the 2009-2010 tax year and am having trouble researching what, if anything can be done for future years. What would be the best way, if any, of transferring some to the wife with 20% tax. She wouldn’t have much room for movement as she would already have £5k rental added to her salary but it would still be beneficial to do something if it's possible.
2. 2. Someone I know has been renting out a flat for a few years and has never declared anything as he noticed on the HMRC website it says that you don’t need to submit a tax return if property income is less than £10k. The tax is still due even if no return is required but he didn't realise this. He said that for much of the time he has been making a loss so thought there was even less need. I am under the impression that losses are even more important to record than gains as they are brought forward to reduce gains when they do arise. Do you agree with me and what advice would you give him? When he submits his first return will they want to see the whole lot backdated to when he started renting it out, or can he work out beforehand how many years it is beneficial to backdate depending on when the losses occurred?
Many thanks for your help with this
MM
Rental Income
Hi Peter
Many thanks for your reply, I've had a look into the Declaration of Trust and it sounds like a difficult thing to manipulate. Should the beneficial interest reflect the actual situation rather than what you want it to show to get the best out of the tax situation? I just want to be absolutely sure of all of the facts. Maybe you can point me in the direction of a research source on this?
This is the first time I've put a post on here so thank you for being my first reply!
Many thanks
Debe :0)
It is a statement of Fact
The form 17 is a statement of fact. The couple are stating as a fact that one of them owns x% of the property and the other owns y%.
Tread carefully.
http://www.hmrc.gov.uk/manuals/inmanual/in140+.htm
Thanks
Hi
Thanks, that is a good link
I have also read somewhere that it may be possible to lease the property to the wife who would then sublet it to the occupiers. Has anyone heard of this happening in practice and how well would it work?
Many thanks
Debe
Two Questions here.
The second first. He will have to revisit SATR for the entire period. He can right to HMRCwith a summary for each year and the carried losses and they will either issue SATR for the whole period or perhaps just for the last two FY's. Your fried is probably referring to:
Disleading and very convient but not factual. The reson for the £2,500 limit is that is the max allowed to be offset against an individuals PAYE Tax Code.
The married couple can have a Declaration of Trust drawn up which will re-apportion the beneficail ownership form the default 50/50 to that ever is needed. This DoT wil have to be formal and a Form17 completed and submitted to HMRC If a solicitor draws up the DoT then let him submit the Form17 as it adds credibility to to the form.
Choose a % that will eat up all her marginal tax bracket plus some as next year there may be a large maintenance bill or repairs/replacement of items then would reduce the gross income. The daft this here is that if you are not married then you just tell HMRC the apportionment in a simple letter.
Regards Peter