Covid-19 Bounce Back loans for property businesses16:06 PM, 5th May 2020
About 3 weeks ago 46
I have been reading your Landlord Tax Tutorials with great interest since the beginning of this year. The penny dropped for me in one of the latest articles and I think my accountants negligence has resulted in my husband and I paying £5,000 a year more in tax than we needed to. I would be most grateful if you would let me know whether I have understood this correctly.
The background is that we had twins just over three years ago. I pay the additional rate of tax at 45% whereas my husband has been the stay-at-home parent. This made financial sense as I was by far the higher earner.
Our rental properties are owned jointly and produce £40,000 a year of rental profits.
My husband has no other source of income.
Our accountants have been submitting self-assessment returns on the basis that we share these profits equally, i.e. £20,000 each.
This resulted in my husband paying £1,800 of tax on his share of the rental income this year, after taking into account his personal allowances.
On the other hand, I paid £9,000 of tax on my £20,000 share of rental profits due to the 45% tax rate.
On reading your tax tutorials it occurred to me that our accountants should have advised us to form a partnership and to allocate 100% of the profit to my husband. He would have paid tax on the other £20,000 at the 20% tax rate, i.e. £4,000. This is £5,000 less than I paid.
Do you agree with my numbers?
I have sent an email to my accountant this weekend and await his response. Meanwhile I am contemplating what to do about this.
Any further thoughts please?
Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.
Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agentsLearn More