My husband’s parents gave him a property over a decade ago. It was before we met, so is in his sole name. There is no mortgage on it, and it is currently rented out. My husband is self-employed and pays higher-rate income tax on the rental income. I am a stay-at-home mum with no income at the moment. Is it possible for him to gift the property to me to lower our household tax returns?
You can gift the beneficial ownership of a property from one spouse to another so that the rental income can be taxed on the spouse whose taxable income is lower.
The simplest form of planning is for the house to be held outright by you, as you are the spouse paying tax at the lower rate. It is also relatively easy to change the beneficial ownership of UK property.
However, some spouses may prefer to hold assets or other property jointly. Such ownership is also helpful if one spouse dies, whereupon the other spouse usually has full access to the asset without the need for probate formalities.
Under tax rules, income from most jointly held assets is deemed to be taxed 50:50. This applies even if the true ownership is not 50:50. However, the couple may choose to be taxed in line with the true ownership ratio.
All this means that if you want the income to be solely taxed at your income tax rate, then the property will need to be wholly transferred to you.
As there is no mortgage on the property, no stamp duty land tax will arise on the transfer.
Also, because the transfer is between spouses, there are no capital gains and inheritance tax implications. Legal advice will be needed on the transfer of the property.
DAVID WESLEY-YATES Chartered tax adviser at Red & Black Accountancy