Sharing rental income with family members

axg20202

Haha - I've been away and returned to these replies. Thanks to everyone who contributed their thoughts.

@theartfullodger - as per my message, I was looking for legal methods. No tax fiddling planned at all. There is nothing illegal about minimising one's tax bill through legal means. Re granting 33% ownership - we don't want to do this.

Re unlimited tax free gifts to elderly parents - I'm aware of this, but that applies to income on which the tax has already been paid. In this scenario, we would pay the full (higher rate) tax on it all and give some to my mother. Not very tax minimising.

@00ec25 - your option 1 is what I'm getting at. In fact, I think there could be a legal method to reduce tax in this situation. It's an option that nobody has mentioned so far....

....Placing the property into a Ltd company and paying me, my brother and my Mum as employees of the company from company revenue (rent). In this method, we would each pay our respective tax bands on our share of the income. My mother is a lower tax band than my brother and I, so that would minimise the total tax paid on the rent.

Anyone got any thoughts on that as a (legal!) approach?

Thanks,
Andy.

onwards&upwards

‘Re-granting’?

Re as in regarding or as in it used to be hers anyway?

00ec25

axg20202 wrote: »

@00ec25 - your option 1 is what I'm getting at. In fact, I think there could be a legal method to reduce tax in this situation. It's an option that nobody has mentioned so far....

....Placing the property into a Ltd company and paying me, my brother and my Mum as employees of the company from company revenue (rent). In this method, we would each pay our respective tax bands on our share of the income. My mother is a lower tax band than my brother and I, so that would minimise the total tax paid on the rent.

Anyone got any thoughts on that as a (legal!) approach?

not mentioned because it is a rub ish idea

- is the property mortgaged? if yes where is the company getting the funds from to pay off the current lender?

- the company, a "non natural" person, will have to pay SDLT at the higher rate on the purchase from you

- the change in ownership is a disposal so will trigger CGT payable by you and your brother

- the company would need to operate both an accounting and payroll system and pay for accounts to be done

there are other negatives I can't be bothered to list given you are simply trying to get a modest amount of income into mother's hands

axg20202

Yeah, thought as much. There's no mortgage, and the property is currently still in my (deceased) father's name , so CGT wouldn't apply (we have just paid IHT on it) but the aggro of running it as a company isn't worth the hassle for a single asset. I think the easiest way is for us the owners to pony up the tax on it all and then give a third of what's left to mum.