Tax question - LandLord

bigjohnuk

Hi Guys,

May be an issue may not be an issue.

My Wife took a Mortgage out on her Mums house in order to generate cash for our family and her brothers family. In order to get the mortgage we agreed that her Mum would pay a rent of £500. However what we do is pay the mortgage for her, i.e. her Mum does not pay any Rent.

Would we have to pay any Tax on this? would the £500 be classed as rent income even thow we pay the Mortgage ourselves?

In profit terms we make no money.

antrobus

OK I'll have a go.

If your mum doesn't actually pay any rent than there is no income and nothing to pay tax on. (But see note.)

However it might be useful if confirmed what you mean by "My Wife took a Mortgage out on her Mums house". Does this mean that she bought the property?

(Note: of course you told the lender something quite different. Very naughty. (Wags finger.) Some people would call this fraud. In fact I'm very much surprised to see that no one has yet come along to make that very accusation. Nevermind. Keep up the repayments and everything should be fine.)

CLAPTON

who now owns the house?
whose name is on the deeds
whose name is on the mortgage

Murdina

Sounds to me like your wife has bought the house or an interest in the house with the mortgage.

If that is the case any money she gets from her mum is "rent" which is taxable income and she can offset against that the interest on the mortgage and any running costs of the house she pays personally.

So chances are no taxable profit.

However, the bad bit if that if the house is sold at a gain over what it was worth when mum transferred part of it to your wife your wife is going to be liable to capital gains tax.

And if Mum dies within 7 years there may be IHT to deal with - indeed arguably if she still lives in the house she has "reserved a benefit" which means the house is part of her estate for IHT whenever she dies.