Possible Tax liability / Mortgage Question

In_for_a_penny

Hello,
I live with my partner and we own our own home. Recently my parents retired and moved into rented property after selling their home in order to release the equity. They were paying rather a lot of rent so I bought another house, which I pay the mortgage on, as a long term investment as pensions are performing relatively poorly. They pay their own bills, council tax etc. and give me a token amount (I suppose which could be construed as rent). This amount does not cover anywhere near the money I pay out each month on the mortgage, term assurance and buildings insurance. However, I am not concerned at that because the second home was bought for investment and hopefully will provide my partner and I a reasonable pension (and give our impending new arrival some inheritance.)

Where do I stand regarding tax being as I am paying out more than I am getting from my parents?

Thank you in anticipation.

Ian_W

Hi penny & welcome,
If this were an ordinary BTL situation you would declare it to HMRC at the end of the tax year showing it as a loss which couldn't be offset against other income but could be carried forward to set against profits in future years. I don't know, but strongly suspect, that as you're not charging your parents a true market rent and they are related it won't be treated that way for tax. I suggest you re-post the details on the "cutting tax" thread to see if you get a response from any knowledgeable lurkers there. Alternatively you could get advice from an accountant for a fee - or free from HMRC by contacting the office that deals with your tax affairs.

In_for_a_penny

Thanks for you reply. I will, as you suggest, post it in the "cutting tax" thread.