Tax for income on a second property

kprigg

Hi, I need to ask a question on behalf of my parents.
My dad has inherited his fathers property & is now looking to rent it out as a holiday home. The deeds are in his name, but if he were to receive income on it he would have to pay more tax on top of the tax for pension he already pays.
My mum receives a minimal pension & is below her yearly tax free allowance. They are estimating they will make around £3000 a year after expenses. Will they be able to receive the money through my mum so it goes through her tax code & will therefore be a lower rate of tax, or as my dad owns the property does it all need to go to him?
Many Thanks in advance, sorry if I havent explained myself very clearly.
Kirsty

firesidemaid

kprigg wrote: »

Hi, I need to ask a question on behalf of my parents.
My dad has inherited his fathers property & is now looking to rent it out as a holiday home. The deeds are in his name, but if he were to receive income on it he would have to pay more tax on top of the tax for pension he already pays.
My mum receives a minimal pension & is below her yearly tax free allowance. They are estimating they will make around £3000 a year after expenses. Will they be able to receive the money through my mum so it goes through her tax code & will therefore be a lower rate of tax, or as my dad owns the property does it all need to go to him?
Many Thanks in advance, sorry if I havent explained myself very clearly.
Kirsty

i can't answer your questions re. tax, but does your mum have savings/in her name? as the income from this adds to her tax-free allowance - has your dad already put savings in her name to take advantage of this? is your mum over 65? (higher allowance)

kprigg

Hi, They both have taken advantage of the tax free ISA's for this year, but I dont think there are any other savings in her name, just in my dads.
Thats just given me a thought that maybe any proceeds could be put into an ISA for each tax year for in my mums name maybe?
Neither are 65 yet so do not qualify for the higher allowance.
Kirsty

lolarentt

My accountant advised me recently that current rules on this are any net rental income must go against the owners of the property for tax, regardless of their being the receiver of that income or not.

It was relevant to us as we have taken income, and registration with the letting agency, in my partners name although the property is in joint names

firesidemaid

kprigg wrote: »

Hi, They both have taken advantage of the tax free ISA's for this year, but I dont think there are any other savings in her name, just in my dads.
Thats just given me a thought that maybe any proceeds could be put into an ISA for each tax year for in my mums name maybe?
Neither are 65 yet so do not qualify for the higher allowance.
Kirsty

if your mum is over 60 then as long as her income (pension) plus earnings from savings is less than her £6k+ tax-free allowance then she does not have to pay tax on ANY of her savings whether in an isa or not - she just needs to fill in a form at the relevant bank. therefore if you dad has savings that he pays tax on then he should move them into your mum's name.

one thing i found out re. turning 65 - when you turn 65, the higher tax-free allowance applies for that whole year, even if you are not 65 until the end eg. march. although, you may have to pay tax at first and claim it back at end of the year.

kprigg

Many Thanks for your replies, youve given me some really useful information that I can forward on to them.
Kirsty

Pennywise

You could transfer the property into the wife's name absolutely or change it to joint tenants with a beneficial ownership split of say 90:10 in her favour. Obviously the wife has to be trusted. She could write a will so that on her death the property goes to the husband's choice of beneficiary (if he wants it to go to someone else). Probably best to talk to a solicitor to get it right.