When do I start paying tax?
Question If a rental property is owned in joint names but then needs to be owned as a sole trader (i.e. when one person changes from high tax payer to low tax payer) - how does this work? If the mortgage/deeds are in joint names these need to be changed and then is the new income tax calculated from the date the change was actioned?
The new income tax is based upon the date of change. To be on the safe side the mortgage and deeds should be changed to single ownership- this may present a CGT problem if the two owners are not married as transfers between partners are not exempt from CGT, only between married couples. There may also be a stamp duty charge on the transfer of value dependent on the value of the amount transferred.
It should be borne in mind that fees and costs will be associated with the transfer and these need to be borne in mind when calculating any tax saving. If there are multiple properties concerned then it may be easier to set up a management company (details of which can be found in my book 'How to Use Companies to Cut Property Taxes, available though our web site).
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