Paying wife for property management: tax-deductible?

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    Paying wife for property management: tax-deductible?

    My wife is no longer working and, while I am at my full time job, she has agreed to run the property business.

    I would then not use a solicitor, or estate agent, and she will (is already) undertaking:

    = Accounts
    = Advertising/finding tenants
    = Correspondence letters/check in/check out/tenant issues
    = Inspection, inventory etc
    = Sourcing & instructing plumber/s electrician/s repairmen / cleaners
    = Some (minor) repairs herself - multi-talented!
    = Any other management activities relating to the property

    At this stage it is a single property letting 4 rooms (under separate ASTs), having communal areas.

    Clearly I would like to pay generously for this role, as I feel it important and she can add more value than a letting agent!. She is proficent in business activbities and has a senior marketing background.

    But what is reasonable to pay what could be the basis for calculation?

    I can only think that a letting agent would charge 12% on income and she would be doing a little more than this for me. Am I being naive in thinking that I could put her on a simple fixed salary of around £200-£250/month (property income is £1550/month at full occupation)?

    This would be fully documented in the business, with direct bank payments for salary, and even an employment contract, if necessary. A fixed salary would be easier to manage than keeping a track of every specific thing she does.

    For sake of doubt she currently has no ownership in the property. Actually, if this was to change later, what would be the impact if she was a beneficial owner at 50% or 99% on whatever the above figure might be.

    Merry Xmas everyone. Would be very interested in your comments and thoughts.

    #2
    You can pay her exactly wht you would have paid somebody else. And add on a bit if you think the service is better.

    If you think you're getting something for nothing, then you're cheating the tax man and paying her too much!

    If employed, then you get into NI, PAYE etc. (probably not at the salary you propose).

    Much easier to change her beneficial ownership to 99% (unless you have previously lived in the property in which case there would be a CGT loss to you on eventual sale).

    Comment


      #3
      Telometer,

      being new ot the BTL myself I ma interested in the 99% beneficial ownership, I am in a similar position to GJM Surrey in that my wife is not in full time employment, nor does she currently have any ownership rights the the single BTL poroerty we have. Are you saying it makes more sense to change ownership into her name ? please can you enlighten me.

      thanks
      Andy

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        #4
        If you pay her then she becomes self employed and has to declare this to HMRC and has to pay NI and tax if you pay her enough!

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          #5
          Who owns the property. ? Regards Peter

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            #6
            Paying wife: how much is reasonable??

            While I am at my full time job, and my wife is a part time supply teacher currently receiving little work, is makes sense that she runs my 4 room HMO, particularly as she does most of it while I am at work anyway!.

            I have some general questions which I wouldn't mind soem opinions on.

            (1) To best document this should she simply generate an invoice on me for "3 months management work" and I pay from my business account directly to her own?

            (2) What is reasonable payment for such activities. She will handle tenant calls, arrange check in and documents and generate my accounts (with my help). She will also be "on call" for any contractor or tenant call/emergency, as well as visit the property and will probably do the inspections and fire alarm testing for me. I have no idea what is a reasonable monthly or annual cost. Are there any guidelines as this is only one property albeit with 4 differneta greemenst and communal areas to contend with, so there are some diseconomies of scale.

            (3) She will need to declare the income of course, and I guess how she does this will depend on whether she will be below or above the no tax threshold.

            Any pointers would be excellent.

            Regards

            Comment


              #7
              Commercial (i.e. is she going to leave you) considerations aside, give her the property; much simpler. (Unless you used to live there and would lose PPR relief.)

              Comment


                #8
                I totally forgot that I asked this question last year (talk about slow to act!). Thanks to whoever pulled this up.

                Noted about transfering property to wifes name - need to think about that one as it would be the most economical way...

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