Paying my Mum a wage - allowable expense?

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    Paying my Mum a wage - allowable expense?

    I own two properties, joint tenants with my wife. Rental income circa £14k (split 50/50 on our self assessments), not mortgaged.

    I had a meeting with an accountant a few weeks ago about the possibility of creating a Ltd company as I have the capital available to purchase another two properties (no mortgage) which I will do once the dreaded B word has been sorted out (if ever!). The main reason for my visit to the account was considering the future and wanting to be able to pay my daughter and son a wage from the "business" to give them some money and also reduces my tax bill.

    The accountant said this wasn't necessary (to create a Ltd) and that I could simply claim an expense for "admin work" for my daughter/son when the time comes.

    This will be a long time in the future........ but is there anything stopping me paying my Mum a wage (she's retired, has no private pension - only a state pension) now to help me with the running of the houses? She actually lives next door to one of my properties and so is the first contact anyways with those tenants!

    I could pay my Mum say £300 - £500 a month which reduces my tax bill and also gives my Mum some extra money and claim it as admin work. She would obviously fill in a self assessment herself each year going forward.

    My account said I could do it with my kids, so is there a reason I couldn't do it now with my Mum?

    #2
    No, but the rates need to reflect reality.
    Paying someone £6k per annum to manage a property that looks to earn about £7k pa isn't justifiable,
    Normal rates would be 10% (probably plus VAT), so less than a grand a year.

    If you want to switch the income around, you could let the flat to your mum at a more tax efficient level and she could be the landlord for the actual tenant.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Originally posted by jpkeates View Post
      No, but the rates need to reflect reality.
      Paying someone £6k per annum to manage a property that looks to earn about £7k pa isn't justifiable,
      Normal rates would be 10% (probably plus VAT), so less than a grand a year.

      If you want to switch the income around, you could let the flat to your mum at a more tax efficient level and she could be the landlord for the actual tenant.
      Makes a lot of sense.

      what you’re saying in your final point is that I could ‘let’ the house to my Mum for say £300 a month and then she sublet it for £600 a month? Something like that?

      Comment


        #4
        Originally posted by RedHitman View Post
        what you’re saying in your final point is that I could ‘let’ the house to my Mum for say £300 a month and then she sublet it for £600 a month? Something like that?
        Yes, exactly - obviously with the figures adjusted to the optimal position for both of you.
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          If you pay her a wage, you will need to register for PAYE and deduct at source, Also you will need to pay here at least the national minimum wage for the time worked.

          Comment


            #6
            Originally posted by leaseholder64 View Post
            If you pay her a wage, you will need to register for PAYE and deduct at source, Also you will need to pay here at least the national minimum wage for the time worked.
            Surely, like say a gardener who I pay once a month for his services, I would just do exactly the same, no?
            I don’t pay my gardeners tax at source for him! I’d be paying my Mum for her administration services, just like I would anyone else (and then claim it as deductible?)

            Comment


              #7
              Your gardener is presumably self employed. On the other hand PAYE often has to be operated for nannies.

              Comment


                #8
                Your idea of setting up a "limited company to hold properties with no mortgage" may be a possibility if the family members are appointed as director instead of being employee and paid a directors fee.

                Some information is given in attached link to website for self -employed persons.

                https://www.contracteye.co.uk/direct...tractors.shtml

                Comment


                  #9
                  Originally posted by RedHitman View Post

                  Surely, like say a gardener who I pay once a month for his services, I would just do exactly the same, no?
                  I don’t pay my gardeners tax at source for him! I’d be paying my Mum for her administration services, just like I would anyone else (and then claim it as deductible?)
                  This is partially why I suggested a different solution.

                  Your mother would be working for you only, so, even if they asserted they were self-employed, it would be a fiction.
                  You'd have to offer paid holiday, make a pension available - you'd basically be an employer.
                  When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                  Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                  Comment


                    #10
                    Originally posted by jpkeates View Post
                    This is partially why I suggested a different solution.

                    Your mother would be working for you only, so, even if they asserted they were self-employed, it would be a fiction.
                    You'd have to offer paid holiday, make a pension available - you'd basically be an employer.
                    Yeah I understand now.

                    She might just really bad at the job and no one else trusts her to do any work

                    Comment

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