Landlord Salary to Wife?

Hi Ray

A very similar discussion thread was started some time ago and already has over 30 comments.

Please see >>> http://www.property118.com/can-i-employ-my-wife-to-manage-my-properties/61430/
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Out of curiosity I had a look through the thread Mark referred to and for me the most salient points were those which referenced the fact that if you're paying a salary to a connected party (e.g. your wife) the salary has to be commensurate with the work done.

I'm a letting agent and my Property Managers earn considerably less than £30,000 per annum. Their duties include inventories and management visits, they organise and co-ordinate maintenance and repairs, and they deal with general issues and queries which crop up during the tenancy. They also carry out check-outs and assist the landlord with negotiating deposit return.

I work on a ratio that I need one full-time Property Manager for every 150 properties we manage. Using that as a benchmark, HMRC are unlikely to accept that managing "a few buy-to-lets" justifies a £30k salary, even if she also does stuff like advertising the properties and conducting viewings..

The bit about balancing property management with her "motherly duties" is completely irrelevant, as it would be for any working parent.

Pressed "Enter" too soon. I was going to add that I appreciate your particular motivation is achieving an income multiple to qualify for a mortgage rather than a beneficial tax arrangement, but you do actually need to be paying the salary to qualify for the mortgage (otherwise its fraud), which means setting up a payroll and notifying HMRC, thus attracting their interest.

In any event, unless I'm missing something, you're hoping to get a joint mortgage, and I'm not sure how just recycling your earnings (from property) to your wife helps - your joint income remains the same after all.

If wife is joint or part owner of the properties then HMRC computer says no. Tried it.

Thanks guys going to knock this idea on the head, absolutely right didn't see all the flaws at first...preoccupied with just how to increase the mortgage multiplier.

Anyone have advice on enlisting family members into a joint mortgage application? If I were to go in with my brother and he remains a "silent partner" and I cover every penny of cost, do you think its possible when it comes to remortgage time I can then remove his from the mortgage?

Apologies for my naeivty!

Reply to the comment left by "Ray ." at "30/04/2016 - 09:04":

Have you suggested it to your brother? I am sure that you are close and trust each other, but he will bear the legal responsibilities and risks of being a property owner. He may also feel entitled to share some of the benefits of being a property owner in time.

The fact that you cannot get the mortgage you require based on your standalone earnings suggests to me that something is not quite right with your finances and so your brother would be taking on a personal risk by getting involved.

Fair points, it was my brother that suggested the idea to me but I don't know if legally I can let him go at the point when we remortgage.

I mean take the scenario:

You are a couple both earning a good salary, but then you start a family and the wife stops working for the foreseeable decade.

That isnt much different from my circumstances except I started a family, the wife stopped working and so we couldn't make use of the multiplier...I presume I am no better or worse than the father who now becomes the sole breadwinner but now has that mortgage on his own head.

Am I missing something...perhaps in that scenario when they come to remortgage will he face issues securing a good rate etc...

Reply to the comment left by "Ray ." at "30/04/2016 - 11:47":

Unless your brother guarantees the mortgage, I doubt lenders will be interested. They may want security on his property.

But to go back to your point, the reason lenders will not take into account your wife's salary is because she is not working - the only income you have to pay the mortgage and support your family is yours and yours alone. If you do not have enough money from your salary and your BTL income, then they will be rightly concerned that you do not have enough income to cover the mortgage under a reasonable stress.

You could try an interest only mortgage - some lenders still offer them for residential purposes and it could bridge the gap until your wife goes back to work.