Discussion
Hi All,
between myself and my immediate family we have 5 properties rented out.
My idea is to pay some of the rental income from each property to my wife (who is at home with two very young children) and she will manage said properties.
This will provide us with some much needed additional income, which, as she will be getting less than £10,000 a year, will be tax free.
is this ok from a tax, legal standpoint?
between myself and my immediate family we have 5 properties rented out.
My idea is to pay some of the rental income from each property to my wife (who is at home with two very young children) and she will manage said properties.
This will provide us with some much needed additional income, which, as she will be getting less than £10,000 a year, will be tax free.
is this ok from a tax, legal standpoint?
Are you actually intending to employ her as the manager of your rental properties?
If she is a genuine employee, then any salaries paid to her will be an allowable expense for offsetting against the rental income. However, would this salary be for the management of one property or all the properties?
If ALL, how would the cost be split between the differing properties.
Which of the owners of the properties would need to register as an employer so that PAYE and NI could be properly administered and accounted for on her salaries.
Alternatively, she could, in theory, set her self up as a self employed property management agent. To do that, of course, she would need to notify HMRC that she is now running a business and she would need to complete a self assessment tax return to allow her to return her self employed income for tax and NI purposes.
And don't forget that the threshold where a person starts paying NI is MUCH lower than it is for tax
2013/14 - tax threshold £9,440,
2013/14 - NI threshold - £7,488 (and it's even lower for Self Employed Class 2 NI).
If she is a genuine employee, then any salaries paid to her will be an allowable expense for offsetting against the rental income. However, would this salary be for the management of one property or all the properties?
If ALL, how would the cost be split between the differing properties.
Which of the owners of the properties would need to register as an employer so that PAYE and NI could be properly administered and accounted for on her salaries.
Alternatively, she could, in theory, set her self up as a self employed property management agent. To do that, of course, she would need to notify HMRC that she is now running a business and she would need to complete a self assessment tax return to allow her to return her self employed income for tax and NI purposes.
And don't forget that the threshold where a person starts paying NI is MUCH lower than it is for tax
2013/14 - tax threshold £9,440,
2013/14 - NI threshold - £7,488 (and it's even lower for Self Employed Class 2 NI).
Thank you Eric,
Yes, the idea would be that she sets herself up as a property managing company / sole trader.
I guess the question was more about whether that was legal by the fact that I own two of, and her mother owns another two of the properties, a way of paying less tax on the rental income by paying my wife to manage them.
Yes, the idea would be that she sets herself up as a property managing company / sole trader.
I guess the question was more about whether that was legal by the fact that I own two of, and her mother owns another two of the properties, a way of paying less tax on the rental income by paying my wife to manage them.
Not illegal or even problematic tax wise as long as -
your wife sets herself up properly for self assessment
the amounts you are showing as being paid to her for managing the property are genuinely paid to her
the amounts paid should be as close to realistic commercial rates for that type of service
If she has no other income then using her in this way is worth doing as she will make better use of her tax and NI thresholds.
However, as I said earlier, she will need to pay some Class 2 and Class 4 NI on income levels over about £6,000.
your wife sets herself up properly for self assessment
the amounts you are showing as being paid to her for managing the property are genuinely paid to her
the amounts paid should be as close to realistic commercial rates for that type of service
If she has no other income then using her in this way is worth doing as she will make better use of her tax and NI thresholds.
However, as I said earlier, she will need to pay some Class 2 and Class 4 NI on income levels over about £6,000.
Yes - there is a bit more to "putting property in someone else's name" than just signing a few pieces of paper. In order for the transfer to be enacted properly, the correct legal procedures need to be followed.
And, if you DO transfer the property (either full or in part), it is legally no longer fully or partly yours.
You need to bear that in mind.
And, if you DO transfer the property (either full or in part), it is legally no longer fully or partly yours.
You need to bear that in mind.
steveT350C said:
Sir Bagalot said:
TBH your two properties should be in her name to make use of the tax allowance anyway.
So all rental income is hers? Of course, did not think of that! Thank you Sir
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