Reducing tax liability
Discussion
Following on from the other thread about BTL's (https://www.pistonheads.com/gassing/topic.asp?h=0&f=206&t=1972002)
I wanted to ask about how to reduce my tax liability to drop from the 40% rate to 20%.
A bit of background;
Earn just shy of £50k (actual is £54K as PAYE but i put some in employer pension scheme - employer has salary sacrifice pension scheme with 5% max contribution from them, i put in about £4k).
Single rental property income profit approx £4.5k (this is the bit i pay 40% on)
Partner receiving child benefit so currently paying some of that back as my income is over £50k.
I support several charities most of whom are giftaid registered, i'd say i donate around £2k a year all in all.
The two main aims are to 1) pay tax at the 20% threshold if possible and 2) to not have to pay the HICB charge if possible.
I wanted to ask about how to reduce my tax liability to drop from the 40% rate to 20%.
A bit of background;
Earn just shy of £50k (actual is £54K as PAYE but i put some in employer pension scheme - employer has salary sacrifice pension scheme with 5% max contribution from them, i put in about £4k).
Single rental property income profit approx £4.5k (this is the bit i pay 40% on)
Partner receiving child benefit so currently paying some of that back as my income is over £50k.
I support several charities most of whom are giftaid registered, i'd say i donate around £2k a year all in all.
The two main aims are to 1) pay tax at the 20% threshold if possible and 2) to not have to pay the HICB charge if possible.
The quick answer is - pay more into your pension.
If your taxable earnings are anything over £50k, you start paying back a proportion of child benefit.
Taxable income includes wage, bonus, company car BIK, private health BIK, etc.
My earnings aren't too far off yours and I'm currently dumping around 30% of my wage into the pension.
If your taxable earnings are anything over £50k, you start paying back a proportion of child benefit.
Taxable income includes wage, bonus, company car BIK, private health BIK, etc.
My earnings aren't too far off yours and I'm currently dumping around 30% of my wage into the pension.
Consigliere said:
Following on from the other thread about BTL's (https://www.pistonheads.com/gassing/topic.asp?h=0&f=206&t=1972002)
I wanted to ask about how to reduce my tax liability to drop from the 40% rate to 20%.
A bit of background;
Earn just shy of £50k (actual is £54K as PAYE but i put some in employer pension scheme - employer has salary sacrifice pension scheme with 5% max contribution from them, i put in about £4k).
Single rental property income profit approx £4.5k (this is the bit i pay 40% on)
Partner receiving child benefit so currently paying some of that back as my income is over £50k.
I support several charities most of whom are giftaid registered, i'd say i donate around £2k a year all in all.
The two main aims are to 1) pay tax at the 20% threshold if possible and 2) to not have to pay the HICB charge if possible.
Transfer the property into your wife's name if she's a 20% taxpayer (bit risk admittedly). That would mean you both pay tax at 20% and there's no HICB charge.I wanted to ask about how to reduce my tax liability to drop from the 40% rate to 20%.
A bit of background;
Earn just shy of £50k (actual is £54K as PAYE but i put some in employer pension scheme - employer has salary sacrifice pension scheme with 5% max contribution from them, i put in about £4k).
Single rental property income profit approx £4.5k (this is the bit i pay 40% on)
Partner receiving child benefit so currently paying some of that back as my income is over £50k.
I support several charities most of whom are giftaid registered, i'd say i donate around £2k a year all in all.
The two main aims are to 1) pay tax at the 20% threshold if possible and 2) to not have to pay the HICB charge if possible.
BTW are you reclaiming the 20% tax on your charity donations?
Countdown said:
Transfer the property into your wife's name if she's a 20% taxpayer (bit risk admittedly). That would mean you both pay tax at 20% and there's no HICB charge.
BTW are you reclaiming the 20% tax on your charity donations?
Property is in my name (was bought before i was married) and the mortgage is too - so unsure if i could change it into her name (no problems with doing so) but at what cost...BTW are you reclaiming the 20% tax on your charity donations?
Yes, claiming the additional 20% through the self assessment on giftaid donations (i think that helps offset the HICB calculation if i'm not mistaken).
FreeLitres said:
The quick answer is - pay more into your pension.
If your taxable earnings are anything over £50k, you start paying back a proportion of child benefit.
Taxable income includes wage, bonus, company car BIK, private health BIK, etc.
My earnings aren't too far off yours and I'm currently dumping around 30% of my wage into the pension.
That may be the case, although i have to see if we can comfortably live on a salary equivalent to circa £45k gross, as the rental receipts go to paying off the capital so don't actually have that money in hand.If your taxable earnings are anything over £50k, you start paying back a proportion of child benefit.
Taxable income includes wage, bonus, company car BIK, private health BIK, etc.
My earnings aren't too far off yours and I'm currently dumping around 30% of my wage into the pension.
As mentioned in the other thread im an accidental landlord and thus haven't set up in an efficient manner, i bought it to live in and couldnt sell when the time came so let it out instead. Reading up about it there are a fair few in my shoes unfortunately.
Consigliere said:
Property is in my name (was bought before i was married) and the mortgage is too - so unsure if i could change it into her name (no problems with doing so) but at what cost....
I was in a similar situation. Cost me c£600 for solicitor to fill in the relevant forms, including change of names on deeds and mortgage, plus stamp duty on the sum of the mortgage transferring over (not the value of the property).Eric Mc said:
There would be massive tax savings for you if you are willing to transfer some, or even all, of the property to your wife. However, there is more to life than tax so consider all the different ramifications of a property split/transfer.
I think this is what im likely to do - i have no issue transferring property into my wife's name. I guess i need to get a solicitor involved.p.s. can i transfer some of the property into my wifes name, but I am the only person on the mortgage?
Wings said:
Nothing stops the OP paying his partner for managing the property, gardening, cleaning, fuel attending property, stationery, postage etc. etc.
Im not sure if this is possible, i pay a managing agent to vet the tenants, handle payments and sort any issues. I could get my wife to do my book keeping and keep on top of the managing agent - but how much could i pay her? Consigliere said:
I think this is what im likely to do - i have no issue transferring property into my wife's name. I guess i need to get a solicitor involved.
p.s. can i transfer some of the property into my wifes name, but I am the only person on the mortgage?
Talk to the mortgage company.p.s. can i transfer some of the property into my wifes name, but I am the only person on the mortgage?
Consigliere said:
Im not sure if this is possible, i pay a managing agent to vet the tenants, handle payments and sort any issues. I could get my wife to do my book keeping and keep on top of the managing agent - but how much could i pay her?
It is, in theory, possible to pay ANYBODY to manage your property - and that includes your wife. HOWEVER, HMRC are perfectly at liberty to ask what work a person actually does for the payments being made. And, of course, unless you set up a payroll scheme to manage your wife's "salary" for managing the property, she would need to set up for Self Assessment to allow her to return the income she is receiving as a self employed property manager.The only "get out" from her having to submit a Self Assessment return would be if her self employed income was under £1,000, which would probably make it not worthwhile.
Eric Mc said:
There would be massive tax savings for you if you are willing to transfer some, or even all, of the property to your wife. However, there is more to life than tax so consider all the different ramifications of a property split/transfer.
When you say 'massive savings' can you explain a little further? Not doubting what you say, just want to sanity check my calcs.Seems to me OP is paying 40% on £4.5k and loosing some of the child benefit.
40% = £1800 tax
20% = £900 tax
So paying an extra £900 a year in tax on the current setup v's changing the mortgage / stamp duty / solicitors to transfer property to his wife's name.
PurpleFox said:
When you say 'massive savings' can you explain a little further? Not doubting what you say, just want to sanity check my calcs.
Seems to me OP is paying 40% on £4.5k and loosing some of the child benefit.
40% = £1800 tax
20% = £900 tax
So paying an extra £900 a year in tax on the current setup v's changing the mortgage / stamp duty / solicitors to transfer property to his wife's name.
Depends on lots of factors. Is the wife using her full personal tax allowance, for example.Seems to me OP is paying 40% on £4.5k and loosing some of the child benefit.
40% = £1800 tax
20% = £900 tax
So paying an extra £900 a year in tax on the current setup v's changing the mortgage / stamp duty / solicitors to transfer property to his wife's name.
And that's just Income Tax. In the future there could be serious CGT savings.
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