A client owns an investment property and pays higher rate tax on the rental income but her husband has some unused personal allowance and fully available basic rate band. It would make sense for him to have some of the income but she wants to leave the property on her death to her children from her first marriage. Is there anything she can do?

With some exceptions, there is a general presumption that spouses and civil partners who jointly own property own it, and the income which flows from it, on a 50:50 basis. This is why couples who wish to share and be taxed on income otherwise than on a 50:50 basis have to effect a change to the beneficial ownership of the asset and then make a declaration to HMRC using Form 17.

This 50:50 rule can work to the client’s advantage. If she transfers the investment property into joint ownership with her husband so that she retains beneficial ownership of 99% of the property and her husband has 1% then, in the absence of a Form 17 declaration, they will be taxed on the income on a 50:50 basis but she is still in a position to pass on 99% of the value of the property to her children.


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