Rental Income - Wife's Allowances

[Ian2007]

My wife and I moved in together after the wedding (her house) and rent out my flat.
We have a good, steady tentant who intends to be there for a few years.
Rental Income about £5,500 - taxable about £3,500

She is shortly going to finish working full time and will not use her full tax allowances so ideally (I think) we want to put the flat in her name and maybe the house in mine?

Both have small mortgages with about 2 years to go.
Is this the best way to optimise her tax allowances and what is the cheapest way to do it?

Many thanks for any help or guidance - Ian

 

[Truemanbrown]

My wife and I moved in together after the wedding (her house) and rent out my flat.
We have a good, steady tentant who intends to be there for a few years.
Rental Income about £5,500 - taxable about £3,500

She is shortly going to finish working full time and will not use her full tax allowances so ideally (I think) we want to put the flat in her name and maybe the house in mine?

Both have small mortgages with about 2 years to go.
Is this the best way to optimise her tax allowances and what is the cheapest way to do it?

Many thanks for any help or guidance - Ian

First point, is that any transfer between husband and wife is done, for capital gains tax (CGT) purposes, on a 'no gain, no loss' basis. So there will be no CGT on the transfer of properties. A decent solicitor would probably charge you £400 to do the job.

With regard to the marital home, there should be no CGT complications because you and your wife will be able to use the private principal residence rules.

The picture relating to flat is different. If the flat was to be sold, and you are still the sole owner, then any capital gain that you make on it will be alleviated by the private principal residence rules and letting relief.

If you transfer the property to your wife and she has never lived in the property, will she be able to claim the private principal residence rules and letting relief to alleviate any capital gain on the sale of property? Well the Inland Revenue seem to be of the opinion that the answer is no and would try and fight you making such a claim.

Therefore, in order to try save some tax by having the rental income in your wife's name you could land her with a sizeable CGT bill in the future.