income tax on rental income; could I avoid it?

[hidetheelephants]

I'm pondering the purchase of some BTL property; the income from them would take me well over my personal allowance(I'm eligible for SED, so my salary doesn't use any of it up). Is it possible to pay the rent from one or more of the properties to my mother as she has no income apart from a tiny pension and has a larger personal allowance anyway? I had a search, but I didn't find anything that looked relevant.

[Kudos]

No, not if you own it

[Eric Mc]

hidetheelephants said:

I'm pondering the purchase of some BTL property; the income from them would take me well over my personal allowance(I'm eligible for SED, so my salary doesn't use any of it up). Is it possible to pay the rent from one or more of the properties to my mother as she has no income apart from a tiny pension and has a larger personal allowance anyway? I had a search, but I didn't find anything that looked relevant.

Sorry, you cannot "give away" your own income in the expectation that it will be taxed in the hands of the person you give the income to rather than yourself. However, from what you are implying, you have no real intention of giving your mother any of this inncome, you just want to pretend to the taxman that it is her's and not yours.

I assume you have raised this question from a position of tax naievity rather than through any intention to defraud HMRC (which is, of course, a criminal offence).

You do realise that a person only pays tax on their rental profits, not their rental income?

[hidetheelephants]

Eric Mc said:

Sorry, you cannot "give away" your own income in the expectation that it will be taxed in the hands of the person you give the income to rather than yourself. However, from what you are implying, you have no real intention of giving your mother any of this inncome, you just want to pretend to the taxman that it is her's and not yours.

I assume you have raised this question from a position of tax naievity rather than through any intention to defraud HMRC (which is, of course, a criminal offence).

It is my intention to give it to her, otherwise I wouldn't ask; very much ignorance(or naivety) on my part.

[Eric Mc]

hidetheelephants said:

Eric Mc said:

Sorry, you cannot "give away" your own income in the expectation that it will be taxed in the hands of the person you give the income to rather than yourself. However, from what you are implying, you have no real intention of giving your mother any of this inncome, you just want to pretend to the taxman that it is her's and not yours.

I assume you have raised this question from a position of tax naievity rather than through any intention to defraud HMRC (which is, of course, a criminal offence).

It is my intention to give it to her, otherwise I wouldn't ask; very much ignorance(or naivety) on my part.

Still won't work.

It's your money so you get taxed on it. What happens to the money AFTERWARDS is not going to affect your tax liability.

You COULD actually give the PROPERTIES to her which means you pass up all entitlement to the property and the income it generates, which of course means, you won't pay any income tax on the rental profits as they are nothing to do with you anymore.

There would be Capital Gains Tax implications too if you gave away the property.

[hidetheelephants]

Eric Mc said:

Still won't work.

It's your money so you get taxed on it. What happens to the money AFTERWARDS is not going to affect your tax liability.

You COULD actually give the PROPERTIES to her which means you pass up all entitlement to the property and the income it generates, which of course means, you won't pay any income tax on the rental profits as they are nothing to do with you anymore.

There would be Capital Gains Tax implications too if you gave away the property.

It may also create a inheritance tax problem; I'd have to ask Mater how valuable the estate is these days. How does the Capital Gains thing work? The HMRC website is obfuscatory(or possibly I'm too dim).

[bailey1966]

So whilst we are on the subject of tax avoidance/evasion? how do the tax people know you have a BTL property, do they look at certain properties and compare ownership with who pays council tax, or is the info sent to them via. some agency.
Always wondered how some people get away with it, and then you hear stories of people who get caught and have to pay 1000's in back tax.

[Eric Mc]

bailey1966 said:

So whilst we are on the subject of tax avoidance/evasion? how do the tax people know you have a BTL property, do they look at certain properties and compare ownership with who pays council tax, or is the info sent to them via. some agency.
Always wondered how some people get away with it, and then you hear stories of people who get caught and have to pay 1000's in back tax.

First of all, the taxpayer has a legal obligation to notify HMRC that they have acquired a property for rental purposes. They have strict time limits within which to do this (3 months from the purchase of the property) so if they fail to notify, they are committing an offence. Not a good start.

If they THINK that they can simply not bother to tell HMRC that they have acquired a rental property, HMRC will find out anyway by information provided through other government agencies, suich as the Land Registry. There are also now legal requirements for landlords to register into tenant bond type schemes so if you fail to register for this you could end up in trouble in this area as well.

HMRC can be slow to catch up with landlords who are not complying with their legal obligations, but they will catch up eventually.

[hidetheelephants]

bailey1966 said:

So whilst we are on the subject of tax avoidance/evasion? how do the tax people know you have a BTL property, do they look at certain properties and compare ownership with who pays council tax, or is the info sent to them via. some agency.
Always wondered how some people get away with it, and then you hear stories of people who get caught and have to pay 1000's in back tax.

I wouldn't think there's much in the way of joined-up snooping on the part of HMRC and councils unless it's for pro btl landlords attempting to fly under the radar. People with just 1 property, letting their flat while working abroad or similar, aren't likely to attract attention unless they ps off their tenants(or tenants ps off their neighbours) and someone dobs them in to the revenue.

[S6PNJ]

Eric Mc said:

First of all, the taxpayer has a legal obligation to notify HMRC that they have acquired a property for rental purposes. They have strict time limits within which to do this (3 months from the purchase of the property) so if they fail to notify, they are committing an offence.

If the person already has BTL properties and they acquire another one, do they have to notify HMRC or can they just do it through the annual tax assessment forms? If they need to notify HMRC, do you have a link by any chance (not to HMRC - that's easy , but to the notification thingy)?

[anonymous-user]

HMRC may also take an interest in all the extra money that keeps landing in your bank account each month.

[Eric Mc]

S6PNJ said:

Eric Mc said:

First of all, the taxpayer has a legal obligation to notify HMRC that they have acquired a property for rental purposes. They have strict time limits within which to do this (3 months from the purchase of the property) so if they fail to notify, they are committing an offence.

If the person already has BTL properties and they acquire another one, do they have to notify HMRC or can they just do it through the annual tax assessment forms? If they need to notify HMRC, do you have a link by any chance (not to HMRC - that's easy , but to the notification thingy)?

The initial notification is essentially a notification to HMRC that you need to complete a Self Assessment tax return for the return of the rental profits (or losses - losses should be notified too).

If you are already returning rental income on a self assessment tax return, then a separate notification for the second or subsequent rental property is not required. Obviously, the rental income details of the new property needs to be included on the self assessment tax return that covers the first year and subsequent years of rental incvome from the new property.

[S6PNJ]

Thanks Eric, self assessment in progress (well it will be when I start! Yes I know I'm running out of time!) and it will include all rental income from all properties, previously declared or not.

[Eric Mc]

S6PNJ said:

Thanks Eric, self assessment in progress (well it will be when I start! Yes I know I'm running out of time!) and it will include all rental income from all properties, previously declared or not.

Don't forget to return losses too. Losses will be carried forward and offset against future profits.

[Deva Link]

hidetheelephants said:

..my mother as she has no income apart from a tiny pension ..

Unless she has some money stashed away she should be getting all sorts of benefits. If you put the BTL in her name then the income from that would cause her benefits to stop.

[Soovy]

Call me old fashioned, but how about just being honest and paying the tax you owe.

I just paid a five figure tax bill. It hurt like bu66ery. But frankly I pay what the law tells me to. Why shouldn't you?

If you don't like it, move. But I don't see why you think you should be "special" and not pay. Why should the rest of us subsidise you?



And HMRC will find you. And ream you. Badly.

Edited by Soovy on Sunday 18th December 18:28

[S6PNJ]

Eric Mc said:

S6PNJ said:

Thanks Eric, self assessment in progress (well it will be when I start! Yes I know I'm running out of time!) and it will include all rental income from all properties, previously declared or not.

Don't forget to return losses too. Losses will be carried forward and offset against future profits.

I think this year will be the first in a few when I will have no losses to carry forward - a large renovation (replace identical items (kitchen and windows and redecoration) so not cap gains afaik) put paid to in-year profits!

[Deva Link]

hidetheelephants said:

I wouldn't think there's much in the way of joined-up snooping on the part of HMRC and councils unless it's for pro btl landlords attempting to fly under the radar. People with just 1 property, letting their flat while working abroad or similar, aren't likely to attract attention unless they ps off their tenants(or tenants ps off their neighbours) and someone dobs them in to the revenue.

I know one of my neighbours has shacked up with a woman and they rent her house out for a bit below the market rent for cash (we know the people who rent it) and I don't believe for a moment that they declare it.

However if you own 2 or more properties in your name, HMRC (so I've heard ) run Land Registry searches on ownership and look into the affairs of people who own multiple properties.

[Deva Link]

Soovy said:

Call me old fashioned, but how about just being honest and paying the tax you owe.

I just paid a five figure tax bill. It hurt like bu66ery. But frankly I pay what the law tells me to. Why shouldn't you?

Who was it said "only the little people pay taxes"?

[hidetheelephants]

Deva Link said:

Unless she has some money stashed away she should be getting all sorts of benefits. If you put the BTL in her name then the income from that would cause her benefits to stop.

The old man has a civil service pension which puts them beyond any of the means tested stuff. They don't need the money but if it was tax efficient I'd give it serious consideration.