Question submission date: March 2023
Full Question: “My Daughter lives in the UK and myself in Ireland. I am giving her £80K to buy an investment property with a 25 year lease, returning £8600 annually. Her annual income is £43K. Will it be better to purchase property through a Ltd company, or personally – either directly in her name or both our names to reduce tax liability?”
With your daughter’s current salary income and the expected rental income, she would potentially be on the cusp of hitting the higher tax bracket, if her total income goes over £50,270. Rental income below the higher tax bracket would be taxed at 20% and any over would be taxed at 40%. But there are some costs and allowances which can be applied against the rental income, which reduces the taxable rental income. With these, it is likely she will not be a higher rate tax payer.
There are some tax advantages of having the property jointly owed, as the rental income would be split in two, potentially reducing your joint overall taxes. But you would both then need to declare the income on UK tax returns and you may also need to declare the rental income to the Irish tax authorities too.
Inheritance tax should be a consideration, as should you die within 7 years of a cash gift, part of it could become taxable to your daughter through inheritance tax.
This article outlines the pros and cons of running property company but for a basic tax payer, with just one property, I would lean towards your daughter investing personally.
We can of course help with either option and have packages to suit either annual personal tax returns with the declaration of rental income (pricing from £250+vat per tax return) or managing a rental limited company (pricing from £65+vat per month).
