17/10/15
Q. I am a higher-rate taxpayer. My wife currently works part time and pays tax at the basic rate. We have a second property that we rent out but the deeds are held in my sole name. Is it worth putting the property into joint names, or even transferring it to my wife outright, so that we pay tax on the rental income at the basic rate?

A. If you live with a spouse or civil partner and have income from property you jointly own, you will normally be taxed on an even split of the income between you. In your particular circumstances there are two options available:

1. Under what is known as the '50:50 rule', you can simply make your wife a partial owner of the property, which means you will each be taxed on 50% of the rental income. For the purposes of these rules, the actual amount she owns is not relevant - it could be 99%, 50% or even 1%, as long as she is a partial owner.

2. You can make your wife a partial owner of the property and notify HMRC of the proportion she holds accordingly. You do this by submitting Form 17 to HMRC to record your actual shares of ownership. You will both then be taxed on the rental income according to the proportion you both actually own in the property (known as the 'actual basis'). You will need to provide HMRC with evidence that your beneficial interests in the property are unequal, for example a declaration or deed. You can complete Form 17 online here. https://public-online.hmrc.gov.uk/lc/content/xfaforms/profiles/forms.html?contentRoot=repository:///Applications/SpecPersTax_iForms/1.0/17&template=17.xdp
RDH Accountant