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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4972
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I currently work and am a higher rate tax payer via PAYE. I

Resolved Question:

I currently work and am a higher rate tax payer via PAYE.
I rent out 2 properties which I also pay an 40% tax on the profit each year by submitting a self assessment. (Ive been renting for the last 4 years)
My partner, who I'm not married to, but have 2 children to does not work. My partner does not own or have a name on any of the rental income homes nor our family home.
Is there any legal way to reduce my tax on properties using my partners 10k allowance. And is there any HMRC Tax legal way of reducing it by using a ltd company.
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

There are options but you have to consider than carefully

You could transfer a share in the property to your partner to enable her to declare profit from rental income on her self assessment tax return, thus mitigating tax payable.
A transfer of share in property would give rise to chargeable gain for you. You could play with percentages to see what percentage alleviates the CGT payable (provided the gain on transfer of share is within your annual gains exempt amount - for this year £11,100, there would be no CGT payable)

You could pay her a reasonable amount for managing the properties for you ... she would have to declare this as her income and this amount would be an allowable expense against property income, thus reducing the profit on which you pay 40%.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

Thanks I have 3 questions to help me understand your answer.

1)Lets say one house is worth £111000 if I transfer 10% of one house per year year to my partner over 5 years to give her 50%.I assume this method will prevent CGT. In the first year with her only owning 10% of the house what can the rent split be?

2)Can my partner invoice me the management fee, and then submit her own self assessment return?

3)What in your experience is a reasonable management fee.Can you give me a reasonable management fee? I have no idea?

Expert:  taxadvisor.uk replied 2 years ago.
Thank you for your reply..


1)Lets say one house is worth £111000 if I transfer 10% of one house per year year to my partner over 5 years to give her 50%.I assume this method will prevent CGT. In the first year with her only owning 10% of the house what can the rent split be?


[a]
You can split the rental income in any proportion you decide as the normal rule of 50:50 split of rental income applies to income arising from jointly owned property where the relationship is that of husband and wife or civil partners.


2)Can my partner invoice me the management fee, and then submit her own self assessment return?

[a]

Yes



3)What in your experience is a reasonable management fee.Can you give me a reasonable management fee? I have no idea?

[a]

This is a difficult one as one should be prepared to justify it.. if the agreement between parties is that she would be take care of total management of the properties then you could expect to pay her say 20-25% of rental income.


I hope this is helpful.

taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 2 years ago.
I thank you for accepting my answer.

Best wishes.

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