Buy-to-let tax relief: can a couple avoid paying tax on a jointly owned rental property?

Can my wife and I reduce the tax burden of our jointly owned buy-to-let property while she takes a career break?

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Question: My wife and I jointly own a buy-to-let property. She will shortly be taking a career break to look after our young children, so will have no earned income. Currently we split the rental income 50-50 for tax purposes. Can we assign all the income to my wife for tax purposes, to make the most of her personal allowance? If it is possible to do that, what else would we have to do?

Answer: This is a frequently asked question but I am afraid that it is not possible for you simply to assign the rental income from your buy-to-let place to your wife for tax purposes.

You would need to transfer an interest in the property to her. This would be done by way of a transfer of equity and the rental income would then be taxed according to the proportions in which you and your wife own the property.

If you transfer the entire property to your wife, then the entire rental income would be taxed as her rental income.

Do remember that if you and your wife have a mortgage that is secured on the property, you will need the consent of your lender to transfer the property into your wife’s sole name. If the lender consents and your wife takes on the burden of the mortgage, then there may be a stamp duty liability.

Indeed, as this is a buy-to-let property, the additional three per cent stamp duty would apply.

These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.

If you have a question for Fiona McNulty, please email legalsolutions@standard.co.uk. We regret that questions cannot be answered individually, but we will try to feature them here. Fiona McNulty is a legal director in the private wealth group of Foot Anstey (footanstey.com)


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