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incorporating Wife tax allowance into Rental Income

09/05/2019 12:46:52
I have recently placed my wife's name on the deeds of my rental property as 50/50 ownership and she is now no longer working due to the birth of our 2nd child. I have in previous years completed the self assessment tax return on behalf of myself as I was the sole owner. I would just like to understand how I can use my wife's income tax allowance to reduce the tax I pay on my rental income now she is a joint owner. Can I use my wife's full allowance to offset? Would both myself and my wife therefore be required to complete seperate self assessments at the end of each tax year?

Thanks
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incorporating Wife tax allowance into Rental Income

09/05/2019 14:52:46
Maybe your best option would be to consult a chartered accountant?
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Re:incorporating Wife tax allowance into Rental Income

10/05/2019 12:32:08
Hi

Thank you for your question. Your wife will have to register for Self-Assessment and complete a Self-Assessment tax return if her share of the gross rental income exceeds £10000 or her share of the net rental income exceeds £2500. Please see further guidance at

SAM 100050

If this is her only income she would be able to offset her Personal Allowance against this. When you complete your Self-Assessment tax return you should only declare your share of the rental income. You cannot allocate any of your wife's unused Personal Allowance against your share of the rental income. I hope this helps.

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This message was edited 1 time. Last update was at 13/05/2019 08:35:20

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incorporating Wife tax allowance into Rental Income

10/05/2019 12:33:46
Yes. You both have to do Self Assessment returns and by so doing your wife gets a personal allowance. If the income falls short of her allowance you can apply for the transfer of the marriage allowance, which is 10% of the personal allowance.
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incorporating Wife tax allowance into Rental Income

10/05/2019 12:33:47
While I would expect an accountant could surely crunch some numbers and assist in calculating the Tax, surely HMRC can provide ruling governing what can/cant be utilised for tax relief between Joint owners of a rental property and how this should be claimed?
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incorporating Wife tax allowance into Rental Income

10/05/2019 14:28:14
Thankyou for the feedback and both of us filing a self assessment makes perfect sense. Can I please just clarify further around my wife filing when you state
" if her share of the gross rental income exceeds £10000 or her share of the net rental income exceeds £2500."?

GROSS rental income £1000 per month (£12k per annum)
My wife's Tax free allowance £12,500.

Given my wife is not in employment, can the rental income simply not be taken into her personal allowance? or do I have to apply a 50/50 split so 6k assigned to me and 6k assigned to my wife? Its not clear what I am able to apportion to each of us?
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Re:incorporating Wife tax allowance into Rental Income

13/05/2019 07:33:41
Hi,

If you now own the property in equal shares 50/50 you should each declare half of the income and half of the expenses, ie £6,000 as in your example.

Your wife's share will be covered by her personal allowances if she has no other taxable income.

Your share will be added to your other income and taxed at the appropriate rate.

The figures quoted of £10,000 and £2,500 relate to the criteria for self assessment. Your wife can transfer 10% of her personal allowances to you, if you meet the criteria.

Please note if you are liable to tax at a higher rate (40% or 45%) the transfer cannot take place.

This link explains how Marriage allowance transfer works:

Marriage Allowance
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incorporating Wife tax allowance into Rental Income

13/05/2019 08:17:00
If a property is jointly owned the share of the rental income is 50/50. As you say it is covered by her personal allowance. She can transfer £1,250 of her personal allowance to you if she isn't using it.
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incorporating Wife tax allowance into Rental Income

13/05/2019 08:32:39
I also share rental properties with my wife. My wife does most of the work relating to the rentals, (checking the properties, cleaning, arranging maintenance etc.) can we split the income in unequal shares based on the share of the work although we own the property 50/50?
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incorporating Wife tax allowance into Rental Income

13/05/2019 08:43:26
For joint ownership of a rental property, it is my understanding that the rental income should be split in the same proportion as the ownership is split.

In your case you mention in the original question a 50/50 split in ownership, and therefore I believe you should split the rental income in the same ratio i.e. a 50/50 split. I believe this is implied without proportions being spelled out by HMRC ADMIN 18's reply above when mentioning 'her share' and 'your share'.

For the 12K income from the property you mention, in a 50/50 split, I believe that is 6K income for 'you' and 6K income for 'her'. If 'she' has no other income then because the 6K income for 'her' is less than her personal allowance (irrespective of any expenses and/or reliefs) 'she' will pay no tax but that does not mean you do not have to declare the income (see notes above form HMRC ADMIN 18 as the net income rule may apply). 'You' will have to declare 'your' share of the rental income i.e. 6K which may be reduced allowing for expenses and/or reliefs, and the net figure will then be taxed at your marginal rate.

It is my understanding, and HMRC ADMIN 18's comments seem to confirm, that the balance of 'her' personal allowance cannot be used directly in relation to your property income. It may be that you can do something with transfer of personal allowance mentioned in a post above to make some indirect use of the unused allowance, but I had never even heard of that possibility so cannot comment.
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Re:incorporating Wife tax allowance into Rental Income

13/05/2019 12:34:00
Hi

Thanks for your question. If you live with your spouse or civil partner and jointly own property, then you would normally each be taxed on 50% of any income arising from renting out the property. However, married couples and civil partners can, in certain circumstances, ask to be taxed on their actual entitlement to income from jointly held property based on actual share of ownership. They can do this by making a joint declaration of unequal beneficial interests on a form 17 and submitting this to HMRC together with evidence of the actual split of beneficial interests. Further information can be found on our website under the following links
Tsem9800

Declaration of Beneficial Intererst

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Re:incorporating Wife tax allowance into Rental Income

13/05/2019 12:46:45
Hi

Thanks for your question. Income would as you say be split 50/50 between a married couple or civil partnership with each of the partners needing to declare their share of income to HMRC. Although you cannot use your wife's unused allowances, there are occasions when a spouse or civil partner can opt to transfer 10% of his/her unused Personal Allowance to the other partner. This is the Marriage Allowance. Further information can be found on our website under the following link;
Marriage Allowance

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