Management fees for a Jointly owned property

[phillip359]

My wife and I own a self managed rental property in joint Names.
I consider this to be hers as it was an inheritance and she does all of the work.
As I understand it the profit from this rental is supposed to be split 50-50 and taxed according to our personal circumstances. My wife is self employed on a low salary and pays 20% whereas I am into the 40% band.

My question is, as she manages the rental business can I pay her for her management services in maintaining the property, getting tenants, inspections etc out of my 50% profit as she does all the work and then have it taxed as part of her income including her 50% of the rental profit?

Phillip

[maths]

The profit arising from a jointly spouses held property 50/50 means that any profit is split 50/50 for income tax purposes. In this case you could not tax deduct management expenses from your 50% share of the profit.

[Lockwood]

Not quite correct - Yes profits are split 50/50. In arriving at profits letting and management fees are allowable expenses. And you can pay yourself for the work done or by your wife or both.
Paying yourself translates into a zero sum position. Increased expenses = lower tax on profit against increase in income tax from paying yourself. The market range for letting and managemet fees is between 10%-!5% of rent. It would be reasonable to claim 50% of the range for your wife.

[bd6759]

And you can pay yourself for the work done or by your wife or both.

Sorry, but that is not correct.

[Lockwood]

Are you saying you must outsource the management function ?

[bd6759]

I am saying you cannot pay yourself for doing it and treat that payment as an expense in your accounts. A payment to the proprietor is a distribution of the profits, not an expense for determining the profit.