News0 min ago
Higher Rate Tax
7 Answers
Can anyone advise please. I've never earned enough before to pay 40% Tax. However, I am now renting out a property and the income from it will have to be declared. I am not sure, but the ball park figure for the higher rate of income tax is circa £41K. My annual salary, together with the rental income and income from other investments may edge me over this threshold.
I am wondering if I could somehow transfer the rental property to my partner, who does not work, and thus is a non tax payer, so the income from it would not then be taxable.
As things stand, if I do go over the 20% tax limit, do I only pay 40% on the difference eg the amount I earn over the 20% earnings threshold?
I do pay into a company pension, so this may mean my taxable income ensures I remain below the 40%, but I will need to check this out with the wages department at work. I'll know for sure when I get my P60 I suppose.
Thanks in advance
I am wondering if I could somehow transfer the rental property to my partner, who does not work, and thus is a non tax payer, so the income from it would not then be taxable.
As things stand, if I do go over the 20% tax limit, do I only pay 40% on the difference eg the amount I earn over the 20% earnings threshold?
I do pay into a company pension, so this may mean my taxable income ensures I remain below the 40%, but I will need to check this out with the wages department at work. I'll know for sure when I get my P60 I suppose.
Thanks in advance
Answers
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OK, a number of points here. Yes, of course you can transfer the ownership of the property to your partner - you'd have to do that at the LR because it's the income deriving from the asset (house) that you want to align to your partner. Not sure the level of transfer cost it gives you the LR though. Its the NET income from the property that counts for tax - the gross...
19:39 Tue 09th Apr 2013
OK, a number of points here.
Yes, of course you can transfer the ownership of the property to your partner - you'd have to do that at the LR because it's the income deriving from the asset (house) that you want to align to your partner. Not sure the level of transfer cost it gives you the LR though.
Its the NET income from the property that counts for tax - the gross income less all maintenance / renewal costs including mortgage interest.
There may be a cunning way to do this - but you'd perhaps have to ask for tax advice (because I can't advise you): if you paid your partner a believable sum of money per annum for running the property for you (£3k, say?), it might do the trick. Wouldn't create NI liability at that level - but she'd obviously have to declare the £3k as income to HMRC.
Yes, you only pay 40% on the minimal amount that goes above the 20% threshold upper limit.
Yes, pension contributions you make are deducted from your income (by your employer) before calculation of the net salary (on which your income tax is assessed).
Yes, of course you can transfer the ownership of the property to your partner - you'd have to do that at the LR because it's the income deriving from the asset (house) that you want to align to your partner. Not sure the level of transfer cost it gives you the LR though.
Its the NET income from the property that counts for tax - the gross income less all maintenance / renewal costs including mortgage interest.
There may be a cunning way to do this - but you'd perhaps have to ask for tax advice (because I can't advise you): if you paid your partner a believable sum of money per annum for running the property for you (£3k, say?), it might do the trick. Wouldn't create NI liability at that level - but she'd obviously have to declare the £3k as income to HMRC.
Yes, you only pay 40% on the minimal amount that goes above the 20% threshold upper limit.
Yes, pension contributions you make are deducted from your income (by your employer) before calculation of the net salary (on which your income tax is assessed).
No Boxtops - you deduct your personal tax allowance off the gross annual earnings (about £9400 in the year just starting, if you have a 'normal amount of personal allowance '), then pay 20% tax on the first £32k of the figure remaining, but 40% tax on any balance. So FF is right - the net effect is that most people can earn just over £40k before the 40% rate starts to kick in.
Sorry not thanked everyone sooner. Really appreciate all the help and useful info. I will look into this further especially regarding transfer of property or paying my partner to manage it. The latter may be tricky as currently the letting agency manage it eg collect the rent and respond to any issues.
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