Question:
If I own a property, can I assign all of the income to my children but retain the ownership of the property? The children would then pay zero income tax as the rental income is within the personal allowance.
Arthur Weller replies:
You can do so, but it will not be effective for tax purposes - you will still be liable to income tax on this rental income, as before. Even if you were to transfer the property ownership to them, as long as they are under 18 and unmarried, and the income is more than £100 per year, you will still be liable to income tax on this income, as before. This is due to the ‘settlements’ rules - see www.hmrc.gov.uk/manuals/tsemmanual/TSEM4300.htm and TSEM4310.
