Rental Property Income.

w50nky

Hi all,

My mother has a rental property which my husband and myself manage on her behalf. The income from this property she has decided to gift to myself. She has payed income tax on this money for 2011/12 via self asessment. From April this year HMRC wil take income rental via PAYE and she has just received a K coding notice. She is a lower rate tax payer. With a recent change of tenants, repairs and some weeks vacant, we may have to go down the self assessment route to ensure correct tax is paid.

My question is, is it possible for the rental income to be payed directly to myself. I have no income other than a very small pension and with the rent from this property I would still be below £7500 pa. This would return her to PAYE and possible save tax?

She has suggested signing the property over to myself now, however as always it may be the case that she could need to go into a care home if needs change in the future.
She has left the property to my husband and myself in her will.

Hope this makes sense.

So, does anyone have any experience of this or any suggestions?

Thanks in advance

CLAPTON

basically no; the rent (for tax purposes) is owned by the legal owner of the property and taxed accordingly.

I see no reason why she can't give you the property
even if she has to go into care and 'derivations of assets' is relevant then you could pay her fees from the sale of the property if necessary.

however there would be a liability for capital gains tax if she gave it to you as this would count as a disposal for cgt purposes


full details would be necessary to identify the pros and cons of any particular course of action

w50nky

Thanks for the prompt response.

She has only owned the property for approx 19 months so it is doubtfully if it has increased in value in present market state. Sadly she never moved in as she had a stoke 3 days after purchase. It has only really had minor improvements.

May investigate transfer, however it would be jointly owned by myself and husband so it sounds like it would still be complex as one of us is paying tax.

Thanks for your input.

nomunnofun

I strongly agree with Clapton in that the property should be gifted to YOU only as the rental profit would attract most beneficial tax treatment.

Please also be aware that when gifted, the value would have to be at least £10600 more than the price that she paid for it before any Capital Gains is payable - is that likely in 19 months of ownership? Even if it was, were any of those repairs major - of a capital nature? These could also reduce the gain.

w50nky

Thank you for your reply, purchase was 140k very little spent perhaps 2.5k on bathroom, carpets, Kitchen work tops and decor with hubby doing most of work. It is unlikely that prices have increased by much ( if any ) in this area.