Girlfriend moving in - contributing financially - tax implications?

DJ_Mike

My girlfriend is going to be moving in in a few months' time, and at this point she has agreed to contribute financially towards bills and also towards my mortgage (though I will still be the sole name on the mortgage).

Does this contribution count as a gift (as there is no contract drawn up and she is under no obligation to pay me) or as rent? Therefore would it have any income tax implications?

I understand the implications with Inheritance Tax and the 7-year period in which a gift can be taxed, although her assets are well below the IT threshold so this shouldn't come into it.

Just want to make sure I'm on the right side of the HMRC before she starts contributing money.

RAS

Read this

http://forums.moneysavingexpert.com/showthread.html?t=2272251

DJ_Mike

Erm... thanks But that thread didn't answer any of my questions... I'm not concerned with the implications of "common law" marriage, of which there is none because both of us are exceedingly (and probably excessively) fair and sensible when it comes to money.

I'm simply concerned with whether the tax man is going to see me as having a lodger paying rent with income tax implications or whether I need not worry.

I see no reason why we can't treat it as a gift but I just want to be sure.

Kyrae

Wouldn't have thought it'd be a problem. My partner and I are buying a house together but the mortgage will only be in his name as I am unemployed at present, but I'll be paying half the mortgage each month.

Whether it's classed as a gift, rent, or mortgage payment will of course be up to your girlfriend, and depend on whether she's paying towards the mortgage out the goodness of her heart or will be owning a percentage of the house one day

Might be worth looking into getting a deed of trust drawn up to prevent any arguments later if anything should happen and you split up and want to sell the house

BitterAndTwisted

Income Tax could be the least of your problems a few years down the line should your relationship break up. Look up the "Rent-A-Room" option on the Revenue's website to check what the upper limit is before tax becomes payable.

PasturesNew

For the room itself, you can get up to £4250/tax year in rent with her as a lodger under the Rent A Room scheme. If you then split the bills, that's outside of this allowance. So, depending how much we're talking about, you can manage it across those two methods.

If you're under the £4250 limit you don't even have to actually declare it as such, it's all a very low key system.

DJ_Mike

£4,250 is more than she'll be paying in rent every year - so it sounds like I'm covered either way!

Thanks!

Debt_Free_Chick

DJ_Mike wrote: »

£4,250 is more than she'll be paying in rent every year - so it sounds like I'm covered either way!

Thanks!

If she is contributing more than just the bills i.e. with an amount going towards the mortgage, then she may acquire a "beneficial interest" in the property. So she may end up as a part-owner in the fabric/value of the property, even though you are not changing the deeds/mortgage.

Of course, everything is reasonable at the moment, but it can so easily go pear-shaped if you break up (speaking from painful, personal experience).

DJ_Mike

Debt_Free_Chick wrote: »

If she is contributing more than just the bills i.e. with an amount going towards the mortgage, then she may acquire a "beneficial interest" in the property. So she may end up as a part-owner in the fabric/value of the property, even though you are not changing the deeds/mortgage.

Going with this thought a moment - we've talked about the whole Rent-A-Room thing - but surely if I took in a complete stranger as a lodger the same rules would apply? I can't see how it makes it any different if the lodger happens to be my girlfriend. Or do complete strangers somehow gain rights over your home if you take them in as lodgers as well?

bryanb

There will be one "Tax" implication. You will lose Council tax 25% single occupant discount.

DJ_Mike

bryanb wrote: »

There will be one "Tax" implication. You will lose Council tax 25% single occupant discount.

Yeah, I got this much. But she'll be going halves with me on council tax so I technically save 25% on my yearly council tax.