Tax - Allowable expenses

[Elaine G]

Hi to all,
I'm new to this forum, and would appreciate information on the following:
I own 2 btl properties. I've never engaged an agent to find a tenant, and never employed an accountant, as my profits (in the form of monthly income) are not enough to warrant this. However, I'm just beginning to realise that I may not have been claiming all the expenses I'm allowed. As stated I manage the properties myself, and my questions are:
1. Am I allowed to pay myself for management time? (Do I then declare it on my self assessment form).
2. How much, in time and hourly rates would be regarded as reasonable over the year?
We also did a major refurb on one of the properties earlier this year, my partner is a 40% taxpayer and does the work for nothing, fitting washing machines/ovens/hobs/taps/decorating etc,
3. I do not claim capital and/or renewal expenditure, instead claiming 10% wear and tear, but, can I claim for the time taken to do the above work?

[Tax Accountant]

Hi to all,
1. Am I allowed to pay myself for management time? (Do I then declare it on my self assessment form).
2. How much, in time and hourly rates would be regarded as reasonable over the year?
We also did a major refurb on one of the properties earlier this year, my partner is a 40% taxpayer and does the work for nothing, fitting washing machines/ovens/hobs/taps/decorating etc,
3. I do not claim capital and/or renewal expenditure, instead claiming 10% wear and tear, but, can I claim for the time taken to do the above work?

I have deleted all irrelevant bits from the above quote.

(1) You cannot pay wages to yourself. Therefore, you do all the work for free to increase the profits for your BTL.

(2) Not relevant as you cannot pay wages to yourself.

(3) Your partner could charge you but then he will need to declare this as his income and pay tax on it at his top rate, ie 40%. This would not be beneficial as your savings would be at basic rate of 22%.

Ramnik

[Elaine G]

To Karongo

Thanks for your response, much appreciated.

[Tax Accountant]

To Karongo

Thanks for your response, much appreciated.

Nice to be appreciated. You are welcome.

Ramnik

[Gigi]

Apologies for butting in onyour thread, but as your questions seemed to have been answered I wondered if I could add one of my own.

We bought the property as an investment for our kids and I want to know if I can give the income left after allowable expenses to them, say in the form of Childrens Bonds, so that they get it all?

[Tax Accountant]

Apologies for butting in onyour thread, but as your questions seemed to have been answered I wondered if I could add one of my own.

We bought the property as an investment for our kids and I want to know if I can give the income left after allowable expenses to them, say in the form of Childrens Bonds, so that they get it all?

I assume that you are not only the legal but also the beneficial owner of the property. As such the rental profits of the property belong to you and declared by you in your tax returns.

However, once the profit has been declared by you as your income, you can do as you like with the rental or any other monies you may have to spare. There is no direct tax on any money you give as gift to your children or anyone else. But some salient points to note are as follows:

(1) If the money gifted to minor and unmarried children is invested in children's names, and they produce interest or other income in excess of £100 in any one year, the income from the investment is again counted as yours for tax purposes. If the money to the children is gifted by anyone other than the parents, the income therefrom belongs to the children for tax purposes. If their Income Tax personal allowances are not used against any other income, they could use these against their own income and therefore not have to pay tax on any such income generated in their own right.

(2) If the money you gift to the children is in excess of the annual gift allowances or not habitual, the gift may count as a PET, ie Potentially Exemt Transfer. This means that if you die within 7 years of the gift, some or all of the gift may be subject to Inheritance tax, depending on your overall financial position. Any gift given outside the 7 years will drop out of IHT calculations.

(3) You say that you have bought the property as an investment for your children. You could take independence financial and professional advice and consider if it is appropriate for the property to be transferred to the children and as such they would become beneficial owners. If the property has already appreciated in value, you may become liable to CGT on the gains to-date. However, any future gains will belong to the children and this may result in lower CGT than would be the case if you retained the beneficial ownership. This however needs to be thought through and needs professional advice before such large assets are placed at the disposal of children.

Next time, please start a new thread rather than tagging on someone else's.

Ramnik

[Gigi]

Sorry :o
And thank you for the comprehensive reply Ramnik certainly given me something to think on

Gigi

[Tax Accountant]

Sorry :o
And thank you for the comprehensive reply Ramnik certainly given me something to think on

Gigi

Glad to have been of help.

Ramnik

[MrShed]

Yet again Karongo, another invaluable reply....you are certainly the PaulF of the tax world! :D (hey if only you got paid by the hour off this forum lol!)

[Tax Accountant]

Yet again Karongo, another invaluable reply....you are certainly the PaulF of the tax world! :D (hey if only you got paid by the hour off this forum lol!)

I wish! Especially as some of my replies are in the small hours in the morning if you haven't already noticed.

But being appreciated helps. If only all people who gain from the replies did the same.

As for being the 'PaulF' of the tax world, I am not too sure.

Ramnik

[MrShed]

I wish! Especially as some of my replies are in the small hours in the morning if you haven't already noticed.


Isnt that "double time" for unsociable hours then Karongo? :D

[dazalock]

It maybe thats when he is at his most sociable

[Tax Accountant]

Isnt that "double time" for unsociable hours then Karongo? :D

Mr Shed, I know, hence all the more reason for 'I wish'.

Ramnik

[Tax Accountant]

It maybe thats when he is at his most sociable

Dazalock, I am sure you meant this in the nicest possible way, otherwise you may kick off another round of debate, especially as this time of the day is not in the small hours of morning.

Ramnik