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Dreaded Tax

Started by Harrier, November 16, 2009, 11:02:01 AM

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Harrier

Hi
I would like to pick your brains on a tax matter.
We are an unmarried couple with a child(6)and have one property which we rent out.
(We bought this one property shortly after our child was born as a means for my daughter to get on the property ladder in years to come.)
When we bought the house my partner and I did so as JOINT TENANCY (as opposed to tenancy in common).
I fall into higher tax bracket. My Partner is the Lower tax bracket.
At the end of the tax year we do the accounts then divide the profit in half and i pay my tax at the higher rate and my partner pays her tax on her half of the profit at the lower rate.
My Question is how can we effectively (and legally) do everything in my partners name so that she declares 100% for tax purposes. (of course the purpose of this question is to reduce tax liability). Do we have to go through solicitors to change things? At the moment everything is just set up in joint names.
Thanks in advance.

Jools

You really REALLY need to take professional advice from an accountant/tax advisor. If you get it wrong you could be in the do do especially since HMRC are activly looking at landlords and their accounts in minute detail at the moment.

Jools

caerhays

The only way you can get your income from the property all taxed at the lower rate is for you to transfer full ownership to your partner.  You need a solicitor to do this.
This has amongst many, the following drawbacks:
1) If your partner leaves you you won't have any claim on the property - its hers !.
2) If you sell in the future, any gain on the original purchase price will be subject to Capital Gains Tax ; but this time you will only be able to claim one persons Capital Gains Allowance.
3) You may be liable for Capital Gains Tax on the gain in value of your half between when you bought the property and when it passed to your partner.
My advice is leave it as it is but if you are really convinced you would be better off then consult a Tax Manager before you talk to a Solicitor.

I had exactly the same thoughts as you when I paid higher rate tax and my wife didn't work.  I consulted a Tax Manager and left things as they are.