Q I own a freehold property with no mortgage, which lets for £1,000 net per month. I have just taken on a new job, which will push me into the higher-rate tax band. Can the rent be paid to my children (aged eight, seven and six)? The property will be my main source of income when I retire, but will fund the children's schooling and further education in the meantime.
Maggie Fleming writes
A No, it cannot be paid to your children because the property belongs to you. Even if you were to put it into trust for your children, which you wouldn't want to do as you intend it to support you in retirement, you would still be taxed on the income.
Where a parent gifts cash or other assets to an unmarried minor child, either directly or via a trust, the income is assessed on the parent unless it is less than £100 a year.
You should check that you are claiming all possible deductions; don't forget the 10 per cent "wear and tear" allowance on furnished properties. If you are married, you could put it into joint ownership so that half the income was taxed at your spouse's (possibly lower) tax rate. This may also have Capital Gains Tax advantages if you ever decided to sell.
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