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Can my husband make a monthly payment to me for property management?

by NickyWelch 13 April 2012 |

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We have a property in joint names that we let out. My husband is a higher rate tax payer and I am lower rate. I do all the administration for the property, I also do my husbands Tax Return for him each year.
I believe that it would be an allowable expense for my husband to make monthly payments to me for carrying out these tasks. Is it as simple as him transfering an agreed amount of money to my bank acount each month, or is it more complicated than this?
If anyone is able to advise on the correct procedure, we would be most grateful.
Many thanks.

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879

MikeGG1 posted
What you are proposing is effectively a salary which would be taxable. I don't think that it would be the best route for you.

What you are really trying to do is to transfer income from him to you so that the joint tax bill is lower.

You refer to him as your husband so I assume that you are legally married. I would have thought that the best idea would be for him to transfer his share of the property or other investments to you so that the income doesn't go to him in the first place.

Assets can transfer back and forth between couples who are legally married or in a legal partnership ad infinitum without any problems. They are considered as having been acquired by the current owner on the original date of purchase and for the original amount.

If the ownership of assets is perceived as an issue, please bear in mind that in the event of divorce, all property goes back into the melting pot for distribution so it doesn't matter whose name is down as owner of the various assets. The only real issue would be in the event of the death of one of you because each of you would only be able to bequeath what was in your own name.

Mike
Posted on 13 April 2012 | Love 0 loves Report
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anthonyj posted
As a build on the comments above I've tried to move property from husband to wife for the same purposes however the process is far from simple when a mortgage is involved. Not only do you have to change the land registry and ownership details but you also need the lender to agree to it (and you pay for the privaledge). This then provides another potential issue because the wife's income is so much lower than required for the mortgage. If anyone knows an easier way to get through this I would love to hear your comments
Posted on 13 April 2012 | Love 0 loves Report
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Hardtruth posted
Actually I believe the question Nicky is asking centres more on her husband than her, i.e. is it an allowable expense that her husband could set against tax. The question of Nicky's tax implication is separate.

Nicky, you did not say if your husband is set up as a sole trader and if so is this rental business part of that income stream or not. If it is then I believe these admin costs are allowable expenses that could be declared as a cost to be set against taxable income for the sole trader business. For sure reasonable expenses for accounting are definitely allowable for a sole trader including so called "entertainment expenses" such as dinner meetings etc.

If the rental income is not part of your husband's business and you both hold joint ownership (50/50) then the only taxable benefit to be realised is a deduction of cost against his share of the rental income to reduce profit on which tax is payable. For you it would be additional income to be added to your share of the rental income. Essentially one up one down but it may be marginally beneficial based on your lower tax threshold. You would need to look at specifics to work this out.

Obviously income paid to you has to be set out clearly in your own tax return. Not sure how this benefits you as any income paid by your husband is by implication tax paid already by him. Surely you are better off just being on the joint bank account and leaving the tax people out of it altogether.
Posted on 13 April 2012 | Love 0 loves Report
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NickyWelch posted
Thank you everyone for your comments.
My husband and I both lived in the property in question before moving to another property, keeping the previous property and renting it out. As the property had been purchased in joint names and the mortgage was in both our names, we left it in joint names.
There is a previous property that is in my name only - this may or may not be of any relevance!
At one point we looked to sell the property in joint names, this was unsuccessful, so it remains as a rental property.
My husband is employed by a large organisation and I no longer have 'paid employment'. I look after our child and the houses are in our eyes 'my job'; so I do all the admin, Tax Returns, etc. This is something that over the years I have automatically carried out without any thought to the cost of my time.
Due to the low interest rates we find ourselves in a position where we may soon have a profit for my husband and may have to pay tax on this. I run at a loss and with no 'paid employment' expect to continue to do so.
About a year ago we started the process of putting the property in joint names into my name only. We ran into all sorts of problems, mainly because the mortgage company refused the application due to my income / lack of. We were forced to accept that the property had to remain in joint names at a 50/50 share. We also looked into giving me a larger share, but again this needed the approval of the mortgage company.
Consequently we are attempting to ensure that we have not overlooked any assistance / expenses that we may be entitled to claim. This is when we became aware of the fact that I probably should have been making a charge for the work that I do for my husband in association with the property and his Tax Return.
My husband is an employee of a large organisation and not a sole trader. He has just moved into the 40% tax bracket.
I do not currently pay tax due to the losses I incur. It would depend on the amount my husband paid me, as to whether or not I would move into a profit and need to pay tax. I believe it would be unlikely. However, if I were to make a profit, I would then pay tax at 20%, rather than my husband paying it at 40%.
It is quite simple for my husband to make a monthly payment to me for an agreed amount, which then becomes an expense to him and an income to me. However I want to do this the right way (assuming this is the right route to take!) and was unsure whether more would be required to show that this was a legitimate expense.
I look forward to your comments and thoughts.
Many thanks
Nicky
Posted on 13 April 2012 | Love 0 loves Report
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snellarama posted
I employ my wife as my secretary to assist me in my self-employed work. I am a 40% tax payer and she is a 20% tax payer. She is taxed on the salary that I pay her, but it means that I pay less tax on the activities because I can deduct the money I pay her from the income that I receive. This has been OK'd by my accountant and HMRC seem happy with it. I would have thought that what you propose was fine and a good way of reducing your tax liabilities, especially since you are actually doing the work!
Posted on 13 April 2012 | Love 0 loves Report
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pushtheriver posted
This is joint property income. I don't believe paying wife will work. You need to have the property split in the proportion you require for income tax purposes. There are other considerations "don't let the tax tail wag the dog"
Posted on 13 April 2012 | Love 0 loves Report
879

MikeGG1 posted
Nicky

Now that we have a bit more information, we can eliminate a few of the suggestions.

It would seem to me that you need to get HMRC to consider the lettings as a separate business from which you can take a salary. You would then be eligible for a Personal Allowance as well as saving on the tax rates. Consult an accountant on the matter who could help you set it up. Once set up, you could maintain it yourself.

It might be easier to get it regarded as a separate business if you combined the 2 properties for the purposes of the lettings rather than the property ownerships. You could then take more than half of the total net profit as well as your salary.

Mike
Posted on 14 April 2012 | Love 0 loves Report
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JOHNBOYR posted
Simple answer to your problem - see an Accountant. This situation is bread and butter work for them and won't be expensive. There are a couple of solutions, these DO NOT involve your husband `paying you a salary'. For example, possibly setting up a partnership agreement where you could apportion the profits to suit. Bottom line - see an Accountant !.
Posted on 14 April 2012 | Love 1 love Report
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NickyWelch posted
Thank you all for your comments. You have certainly given us some further points to consider!
I am happy to consult an accountant if that is the right way to go. However, I don't want to do that if it is unnecessary.
My husband making the monthly payment to me would reduce his profit sufficiently for our requirements.
Therefore, if the process is as staightforward as my husband setting up a monthly standing order, and that being shown as an expense for him and an income for me, I can do that without consulting an accountant. I just need to be certain that this is all that is required to do this and that HMRC would not need anything further.
Nicky
Posted on 19 April 2012 | Love 0 loves Report

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