Do Children Pay Tax on Income?

vivera01

I have recently been left a house in my father's will and after it being on the market for the past 12 months, and two failed sales, I am now considering renting it out to save any further deterioration over the winter. The bequest is on the condition that half the value is put into a trust account for my daughter's education.

To minimise my tax exposure, is it feasible to deposit any rental income (around £9000 per year) directly into my daugher's account? Does she enjoy the same tax free allowance as an adult? If she went over that, would she be taxed at my tax rate (40%) or at the basic rate?

Thanks ever so much.

McKneff

If the money is yours, Im not sure that what you would be doing is legal to be honest.

RAS

Your daughter will have a standard personal tax allowance like everyone.

The issue will be what sort of account you put the money into. You need advice on that.

xylophone

It is not clear whether your daughter has been left half the house "in trust" or half the value of the house on sale thereof. You should take legal advice on this point.
With regard to your child and tax see http://www.hmrc.gov.uk/tdsi/children.htm and note the "£100 rule"
and http://www.hmrc.gov.uk/tdsi/ten-per-cent-guidance.htm (the allowance figures are out of date) see http://www.hmrc.gov.uk/rates/it.htm/#2
See also http://www.direct.gov.uk/en/moneytaxandbenefits/managingmoney/planningyourpersonalfinances/dg_10013916

I would strongly suggest you take professional advice.

McKneff

If the capitol belongs to the OP though, isnt that tax evasion or the other one, cant bring it to mind at the moment.

twig1_2

You will have deemed to have earned the income as the property belongs to you whether you deposit in your childs account or not. Once deposited in your childs account any income made ie interest over £100 will be taxed as your income. Would imagine the only way around this is to transfer the property into the childs name would have thought this gift would have cgt implications .

xylophone

to transfer the property into the childs name

No - see
http://www.property-tax-portal.co.uk/taxquestion61.shtml

Dunroamin

Given what you say about the conditions of the bequest, what would happen if you didn't put half into your daughter's name? Is it just a wish on behalf of the deceased or is there some kind of legal requirement to do so?

vivera01

My daughter is the only grandchild. My dad left the house to me but if sold, half the money is to be put in trust for her. As my only child, she will inherit my entire estate when I die anyway.

I thought perhaps she could have the rental income without having to pay as much tax as I would pay should it come to me.

vivera01

I should have also said, I haven't transferred the property into my name. It's being managed whilst still in probate.

princessdon

vivera01 wrote: »

My daughter is the only grandchild. My dad left the house to me but if sold, half the money is to be put in trust for her. As my only child, she will inherit my entire estate when I die anyway.

I thought perhaps she could have the rental income without having to pay as much tax as I would pay should it come to me.

personal question and you don't have to answer on here - more food for thought

If you are on benfefits (even CTC) this inheritance can result in being ineligible.

worth talking about with the trustees or solicitor if this is the case.