tax on rental income

Can anyone help, asking for a friend, she has a house that is in a trust deed for her children, her and her husband are joint trustees untill the youngest is 18. If the house is rented out is the rent liable for tax? Have searched various websites and cannot find the answer

22 Comments

Yes!

There are quite a few things that can be claimed back so there are ways round it. They could maybe pay one of the kids the rent using up their tax free allowance?

Yes, rent is a form of income and would therefore be liable to tax

Actually because it is a Trust, the Trustee would be liable to the Tax because the kids cannot earn the income directly to benefit from the use of their tax free allowance.

Benjimoron;2080367

There are quite a few things that can be claimed back so there are ways … There are quite a few things that can be claimed back so there are ways round it.



maintenance is a good one to claim back tax as there's lots of thins that could go under this heading - paint, gardening, doors, windows, appliances etc etc

PapaSmurf;2080408

maintenance is a good one to claim back tax as there's lots of thins that … maintenance is a good one to claim back tax as there's lots of thins that could go under this heading - paint, gardening, doors, windows, appliances etc etc



even if it's not used on the house in question!!!

derek conway mp who paid his sons for working!! for him
he was claiming rent allowance for 1 of his houses that he had put in trust for his kids
so maybe there is a tax loophole for you
have you got free legal advice line on your car insurance / bank account it could be worth it to you to enquire
as they could save quite a lot

Original Poster

Cheers all for your replies, and so quick too! your a lovely bunch!
the rental income is only £4800 a year and there are 3 children so does that come under the category of one of their personal allowance as someone has stated? Or are the trustees (mum and dad) liable for the tax?

nadss;2080481

Cheers all for your replies, and so quick too! your a lovely bunch! the … Cheers all for your replies, and so quick too! your a lovely bunch! the rental income is only £4800 a year and there are 3 children so does that come under the category of one of their personal allowance as someone has stated? Or are the trustees (mum and dad) liable for the tax?



Can't the parents employ the children so it comes from their tax free allowance?

Original Poster

Benjimoron;2080501

Can't the parents employ the children so it comes from their tax free … Can't the parents employ the children so it comes from their tax free allowance?



youngest is 10, eldest 14

Nemz;2080377

Yes, rent is a form of income and would therefore be liable to tax



as above so if parents are working and using up their allowance they will have to pay at least 25% tax on rent at least!! - as said before make enquires - even worth seeing an accountant - paying £70 - 80 to save £1200+ i would:thumbsup:

Original Poster

holly100;2080632

as above so if parents are working and using up their allowance they will … as above so if parents are working and using up their allowance they will have to pay at least 25% tax on rent at least!! - as said before make enquires - even worth seeing an accountant - paying £70 - 80 to save £1200+ i would:thumbsup:



oh btw, mother and father divorced, father working, mother not. More concerned about the mothers situation on this, does the fact that shes not working change things?

sorry a bit off subject but a good read related for parents.
Read the EXTRA PROPERTY BIT

news.bbc.co.uk/1/h…stm

holly100;2080632

as above so if parents are working and using up their allowance they will … as above so if parents are working and using up their allowance they will have to pay at least 25% tax on rent at least!! - as said before make enquires - even worth seeing an accountant - paying £70 - 80 to save £1200+ i would:thumbsup:



rent is taxed at different percentages dependant on how much the taxpayer earns now taxed at 20% for starting and basic rate payer and 40% for a higher rate payer.

if there was a way of putting it in the mothers name no tax would be due as the rent amount would be covered by the mothers annual personal allowance.

nadss;2080641

oh btw, mother and father divorced, father working, mother not. More … oh btw, mother and father divorced, father working, mother not. More concerned about the mothers situation on this, does the fact that shes not working change things?



That's perfect! she can get the rental income and cover it with her tax free allowance!

and in relation to the mothers situtation- she wont have to pay tax on the rent because she will be intitled to recieve half the rental income as part of her taxable income (unless an election has been made to make this different) and the amount she recieves is covered by her personal allowance (which was £5225 for 07/08)

Original Poster

Nemz;2080692

That's perfect! she can get the rental income and cover it with her tax … That's perfect! she can get the rental income and cover it with her tax free allowance!



Even if she is in receipt of benefits?

Nemz;2080692

That's perfect! she can get the rental income and cover it with her tax … That's perfect! she can get the rental income and cover it with her tax free allowance!



if the house is already been rented out i believe the income will be split 50:50 as no election was put in place as to how much each rent should recieve

nadss;2080708

Even if she is in receipt of benefits?



I think so, although I think only half the income can be in her name which would then be due no tax, but would need tax returns done.

The father would probably have to pay tax and do tax returns but could probably claim alot back for home improvements etc.

ok these benfits are taxable

Taxable BenefitsA large number of other benefits, however, are taxable. … Taxable BenefitsA large number of other benefits, however, are taxable. The list of taxable social security benefits includes: statutory maternity pay; jobseeker’s allowance; retirement pension; higher rate incapacity benefit; and income support if it is being drawn as a result of a strike or other industrial action. Again, an exhaustive list is available on the DirectGov website.The social security payment that the highest number of people will be required to pay tax on is the Basic State Pension. After this is paid by the government to the pensioner, it is then the responsibility of the recipient to ensure that they pay the correct amount of tax on this payment. Indeed, this is the case for all social security benefits, and so it is important that you are familiar with which of your benefits are taxable and which are not in order that you pay the correct amount to the Inland Revenue.

allstar2;2080717

if the house is already been rented out i believe the income will be … if the house is already been rented out i believe the income will be split 50:50 as no election was put in place as to how much each rent should recieve



Not quite sure about the benefits, but I think she should still be able to do so without affecting her benefits. You are allowed to have savings of up £8,000.00 last time I looked at benefits. However, I am fairly sure that tax credit would eleveate any effect it would have on her benefits. She would not be liable to tax because the current tax free allowance is £5,435.00.
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