Income from Property

[Deleted member 149413]

I met with a new client earlier this week. She has rented her main property and brought a small flat to live in, to reduce basic living overheads etc. She has the rent paid direct to her. She is married but her husband now lives and works permanently in Canada.

However he still owns 50% of the property being rented out and will entitled to receive 50% of the gain (or loss).

His 50% income each year will be his only UK income and will not exceed his UK personal allowance.

My client has advised that her husband will report any gain on his Canadian Tax Return.

However, I am not sure it's as simple as that (is it ever)

Am I right in thinking that I report my clients share on her SA return. Her husband will also need to make a SA Return ?

Could he be treated as a Non Resident landlord and make application to HMRC to receive rental income with no tax deducted.

Is there any easier way that I am overlooking?



Thank you


:redface:

 

[Mitchells Bristol]

The husband will not necessarily need to submit a UK tax return - if he is not chargeable to tax there is no requirement to register. He will, however, need to apply to HMRC to receive his 50% of the rental income gross under the non-resident landlord scheme. Otherwise there is an obligation on the tenant/agent to withhold tax at source.

It may be easier to transfer beneficial interest in the property wholly to the wife - but you would need to consider whether this is tax beneficial or detrimental

 

[Deleted member 149413]

Many thanks for the reply.

For year 1, the rental income ran at a loss.

For year 2, I expect a small gain but this will be covered by my clients personal allowance. As my client has no other income, I also expect that in the long term any profit will remain under her personal allowances.

If we were to transfer the beneficial interest in the property wholly to the wife, is it possible that this could have CGT implications.

 

[Mitchells Bristol]

If the beneficial interest is wholly transferred the husband could potentially sacrifice any PPR relief built up

 

[Deleted member 149413]

Thank you.

 

[US_US_Taxes]

If she rented the property out did she inform the mortgage company?

Optional addition: She could make more money on the rental if she transferred the mortgage from repayment to interest only. If she has not done so already.

 

[Deleted member 61074]

If she rented the property out did she inform the mortgage company?

Optional addition: She could make more money on the rental if she transferred the mortgage from repayment to interest only. If she has not done so already.

Not necessarily the best advice. The decision as to which style of mortage you have depends also on what you want to happen at the end of the term.

Use interest only if you want to maximise month by month income and are happy to sell at the end of the term, consider repayment for smaller monthly income but the house is paid for at the end of term.

Of course take advice from your mortgage advisor who will be better aware of your full financial situation and goals.

 

[US_US_Taxes]

Not necessarily the best advice. The decision as to which style of mortage you have depends also on what you want to happen at the end of the term.

Just to point out my own quote "Optional Addition". I do agree with your points hence why I said option, just to point that to ensure people do not think I am was making a generalised approach