AirBnb Tax Split

Robertr

I own a property (our first house) and am currently renting and living in another one.

We are currently starting to use AirBnb on it. I know we will have to do a tax return for any income, just wondering if there is any benefit for my wife (who is a say at home mother with no income) to capture some or all of the income or will it all be added to my own income and taxed at higher rate? We are already taxed as a married couple so I have some of here tax allowance.

Not trying to avoid any taxes due, just want to ensure we are setup to for the best outcome. We will probably get a professional to look after it but any initial guidance appreciated. Thanks.

tanit

Robertr wrote: »

I own a property (our first house) and am currently renting and living in another one.

We are currently starting to use AirBnb on it. I know we will have to do a tax return for any income, just wondering if there is any benefit for my wife (who is a say at home mother with no income) to capture some or all of the income or will it all be added to my own income and taxed at higher rate? We are already taxed as a married couple so I have some of here tax allowance.

Not trying to avoid any taxes due, just want to ensure we are setup to for the best outcome. We will probably get a professional to look after it but any initial guidance appreciated. Thanks.

Airbnb income could be taxed under Case I/II or under Case IV depending on how you are operating the whole thing. There are advantages and disadvantages to carry the business one way or the other.

If your wife has no income and if you are jointly assessed if she runs the business as a Case I/II scenario she will lose any Home Carers tax credit in full or in part depending on income from Airbnb. In exchange she will unlock the possibility of getting that income taxed at 20% as there is a significant amount of the tax band that cannot get transferred to you (only 9,000 can be transferred between spouses for the 20% band). If you are being taxed at 40% or being closed to being taxed at 40% and she is legitimately doing work in the Airbnb you might want to get the whole thing as her running bnb business using the Airbnb platform and unlock all the credits (Earned Income tax credit) and tax bands available to you, but you are going to have to run the place on a regular basis so that Revenue doesn't come knocking on your door.

It makes sense for your wife to be involved, but I recommend you to get proper tax advice to do things right. Under 5,000 Euros income you won't need to register for self-assessment above that you will and it gets complicated. Good advice about the whole thing will save you money and cover the fee you are paying for it.

Peregrinus

Robertr wrote: »

I own a property (our first house) . . . .

You own it? Not you and your wife jointly?

You don't get to allocate this income to whoever you please. If you, Robertr, own this property, then rental income arising from the property is income of Robrertr. If the property is owned jointly by Robertr and wife in equal shares, then the income is income of them jointly in equal shares. And so forth.

Peregrinus

Peregrinus wrote: »

You own it? Not you and your wife jointly?

You don't get to allocate this income to whoever you please. If you, Robertr, own this property, then rental income arising from the property is income of Robrertr. If the property is owned jointly by Robertr and wife in equal shares, then the income is income of them jointly in equal shares. And so forth.

Aren’t even non married couples who jointly own a property able to let all the income from rent go to one or the other if they choose. For instance if doing rent a room where only one of the owner resides and therefore they take all the income as the other owner would be liable for tax.

I’d have thought a married couple could allocate money as they wish in this way as they are married doesn’t she “own” the house also anyway.

Failing that what about leasing the house to his wife rent free and then she sublets it, the income is then hers. No CAT issues etc between married couples.

Peregrinus

Elliot Lively Ticker wrote: »

Aren’t even non married couples who jointly own a property able to let all the income from rent go to one or the other if they choose. For instance if doing rent a room where only one of the owner resides and therefore they take all the income as the other owner would be liable for tax.

Nope, married couples can't swap income like that. They can swap unused tax bands and allowances (within limits) and if the wife has unused allowances which she doesn't already transfer to her husband there might be some scope there.

Elliot Lively Ticker wrote: »

I’d have thought a married couple could allocate money as they wish in this way as they are married doesn’t she “own” the house also anyway.

No, she doesn't "own" the house. If it was at one time their family home then it can't be sold without her consent, but it's not her house. If it's sold or rented then, from a tax point of view, the sale proceeds or rental income accrue to the husband, who owns the house, and not to her.

Elliot Lively Ticker wrote: »

Failing that what about leasing the house to his wife rent free and then she sublets it, the income is then hers. No CAT issues etc between married couples.

Looks highly artificial, and bound to be challenged. A more straighforward and effective strategy would be to transfer a half-share in the house to the wife. No CAT, since they're married, and I think a stamp duty exemption is available. Husband would need to be aware, though, that he really is making a very valuable gift to his wife. And if the house is mortgaged you'd need the consent of the bank. Plus, there'd be legal/conveyancing costs.

Robertr

Sorry for delay getting back.

Should have made clear, we both own the house jointly and are assessed jointly. All available tax credits etc. have been transferred to me as she has no income.

Based on bookings it looks like the property will generate 20k+ a year in income.

So could she take the rental income an apply her allowances , bands etc.. first or would we have to split the income 50/50 before calculating any liability?

If it makes any difference she is the one doing all the work running it, which is not easy.

Thanks.