Can I employ my wife to manage my properties?

An alternative strategy could be to gift half of the properties to your wife, thereby utilising her personal allowance for the rental income annually and again on sale for CGT. In your situation (higher rate tax payer with spouse not earning) you have many opportunities to reduce your tax by gifting to your spouse. Gifting can be done by a simple Deed gifting half of each flat to her, or you can pay to register it with Land Registry. Either way the result is the same and accepted by HMRC,from my experience.

It would be quite handy to have a company in, say, Cyprus or Malta to manage ones properties in such a way that the profits got made there rather than in the UK, wouldn't it?

Reply to the comment left by "Yvette Newbury " at "13/12/2013 - 14:52":

That's an interesting point you make about selling half to a spouse. I call this my 50/50 strategy or "milking the buy to let" as it's also a good way of borrowing more than the original purchase price, when property values rise, for any purpose and still being able to offset 100% of interest against rental income. Please see >>> http://www.property118.com/landlord-tax/

There is no CGT on transfers between spouses of course. I would suggest sales rather than gifting though for the reasons explained in my article linked above. Note that a sales between spouses does not constitute a new base value for CGT purposes on sale.
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The only reason I can see for selling one to the other would be if you were trying to raise more money as you suggest in your article. In that case it's a good idea - presumably the mortgage providers etc have no problem with both parties living at the same address, one being the vendor and the other the purchaser? And presumably you would need a conveyancer to assist (again at a cost)?

Gifting requires nothing other than signing a piece of paper and then all profits are shared between spouses, the net result is a greatly reduced tax burden on the higher rate tax payer.

Reply to the comment left by "Jerry Jones" at "13/12/2013 - 16:47":

This makes me go cold - don't do it Jerry! Seriously, isn't this exactly what HMRC are looking out for? I think they would see through an attempt to claim that a company in Malta (say) is managing a property based in the UK. Without the property in the UK the profits would not exist for that overseas company (unless it was also managing property in other overseas countries).

Reply to the comment left by "Yvette Newbury " at "13/12/2013 - 19:56":

I meant to conclude that if each property is netting profit of £1,000 per annum it is unlkely to be cost effective to sell to the spouse.
Gifting requires nothing other than signing a piece of paper with a witness to your signature and then all profits are shared between spouses from that day forth. The net result is a greatly reduced tax burden on the higher rate tax payer.

Reply to the comment left by "Yvette Newbury " at "13/12/2013 - 20:01":

Can't see it being necessary any time remotely soon 🙂

However, properly set up I'd imagine a scheme like this should be entirely kosher!

I don't know if I'm missing something, but wouldn't it be sensible to jointly own the properties?

You would have an immediate reduction in tax liability and also CGT when you come to sell them.

Reply to the comment left by "Mark Alexander" at "13/12/2013 - 09:47":

I would be careful about the comment that it is not illegal to overpay someone. There is quite a lot in the HMRC guidance about paying a connected person more than the work justifies - and there has been case law.

Paying someone £500 for half an hour's work is likely to be looked on as more than the job's worth.

Tax liability for jointly owned properties for both income tax and CGT is enhanced. In other words if jointly owned then any rental profit is split 50/50 and taxed at the appropriate rate for the owner, either basic rate or higher rate. CGT allowance is effectively doubled as you can both claim the 11k allowance (approx) making 22k before you pay any CGT. But in a case where one partner has a salary and the other does not then if the rental profits are under 20k per annum then the unearning partner does not make full use of her 10k personal tax allowance. So a vehicle needs to be put in place that legitimately diverts some of the rental income into earned income for the none working partner.