Rental Income - What is the tax payable?

I am about to rent a holiday home that I no longer use - due to a chnage in circumstances. I currently do not have a mortgage on the property and ould prefer not to mortgage the property. I am currently on the higher band of PAYE and I am wondering if the rental income will be subject to the full rate (42%)? The property to be rented is in my wifes and my name. My wife works at home and has no direct income. Can the rental income be allocated to my wife so as to avoid the higher level of tax or how is the rental income taxed / allocated in these situations? Somebody mentioned that the income is allocated to the name on the rental agreement. Very confused about this so any help appreciated.

The income is legally 50:50 so hers would be at 20% and yours at top rate. I don't believe it works but if you assign, legally, the entitlement to receive the rent to your wife then it all may be taxed at 20%. Again, I don't believe it works as I recall someone trying it but something to explore a bit more.

Do you own both the legal and beneficial half of the property that's in your name or are you holding the beneficial interest (in the half you have) in trust for your wife? If it's the latter (backed my a document such as trust document) then perhaps that's a basis for arguing the income is fully your wife's and taxable at her rates only which may be 20%. Obviously there are legal implications, irrespective of tax, to such an arrangment which should be discussed with a solicitor.

Jimmy Bond said:

I am about to rent a holiday home that I no longer use - due to a chnage in circumstances. I currently do not have a mortgage on the property and ould prefer not to mortgage the property. I am currently on the higher band of PAYE and I am wondering if the rental income will be subject to the full rate (42%)? The property to be rented is in my wifes and my name. My wife works at home and has no direct income. Can the rental income be allocated to my wife so as to avoid the higher level of tax or how is the rental income taxed / allocated in these situations? Somebody mentioned that the income is allocated to the name on the rental agreement. Very confused about this so any help appreciated.

Click to expand...

Thanks Marc_Mc,

I originally purchased the house almost 2 years ago and put joint names on the ownership documents (my wife and me). I'm not sue if that answers your question??

Also, can furniture & electrical goods purchased for the property be expensed against the rental income, even if I purchased these goods alomost 2 years ago.