Charging Boyfriend Rent...

danielley

I was told by my solicitor that my partner (who has been living with me for 4 years and paying me 'rent) would be entitled to have a claim on the property if we split as he paid me a set amount which was half of the bills etc. Luckily the house value has reduced since he moved in

Maybe the way of avoiding this is to have a proper tenancy (lodger agreement)? and only charge him a set amount which is nothing to do with 'half the bills'

Hopefully the legal eagles amongst us can set this striaght?

I truly didn't want to suggest you will split, but you need to ensure that you are not taking on all the risk (i.e. putting your deposit into the house and getting a mortgage) and then that somebody would be able to make a claim.

Cissi

danielley wrote: »

I dont want to condemn the relationship, but would he not have a claim on the property if you were to split?

Not if they do this properly, ie boyfriend is a lodger and his financial contributions are used as rent. OP, make sure you do put an agreement in place (even though it wouldn't really give your BF any security - as a lodger he'd have very few rights). He should be able to contribute more than the "rent a room" limit without tax implications for you, for example by contributing substantially to the food bill. Don't get his name on any utilities bills though.

Basically you want to make sure that if you should split up in future he can't claim that he's paid part of the mortgage, or else he may be able to claim a share in the property.

Edited to add: I've only just seen Danielley's second post, and I agree, that's the way to do it: make sure he pays a set amount for rent every month. And let him buy a lot of the food (in order to keep the rent below the taxable threshold)...

ladylouise62

My mortgage lender wanted a letter from the other person confirming that they had no claim on the house, and was relevant when I was just letting a room rather than an actual boyfriend. I'm not sure how necessary that was for just a lodger, but I do know that what you spend the money on is irrelevant - if the boyfriend is paying money that is used to pay for day-to-day living then it could possibly be used as a basis for making a claim. You definitely need to get the situation set down on paper.
BTW - good luck in becoming a home-owner :-)

00ec25

Cissi wrote: »

. He should be able to contribute more than the "rent a room" limit without tax implications for you, for example by contributing substantially to the food bill. Don't get his name on any utilities bills though.

Basically you want to make sure that if you should split up in future he can't claim that he's paid part of the mortgage, or else he may be able to claim a share in the property.

Edited to add: I've only just seen Danielley's second post, and I agree, that's the way to do it: make sure he pays a set amount for rent every month. And let him buy a lot of the food (in order to keep the rent below the taxable threshold)...

that would still count as tax evasion - under the rent a room scheme it is the total income received, not what it is spent on - there is no difference between splitting the cost of the food or splitting the cost of the utility bills, it is still untaxed income received by the LL in connection with the fact the lodger is in occupation - the only reason the person is paying towards food is because they live there, if they didn't you won't get the contribution towards food or any other form of household expenditure.

all income received must be declared - do not commit tax evasion - anything received above £4,250pa is taxed. TYou are given the first $4,250 pa tax free allowance precisely to cover the fact it is spent on such things and would thus be a deduction against rental income if you used the "normal" method to caluclate the taxable profit on your renting out a room

bris

Would he ever be legaly classed as a lodger? I'm thinking if it all goes sour he would be classed as a partner with all the rights that goes with it. Whether that allows him to a share of the house etc is for the courts to decide, but as he is contributing to the house the OP may not find it as straight forward as treating the BF as a lodger.

aqueoushumour01

Sagz wrote: »

I'm no expert, but I'd say get the mortgage on your own and make over payments with the money you get from the BF, if there is any left over then put in an ISA (or other savings) until it's time to re-mortgage and use the savings then to get a better deal.

this is a great idea. by using the rent to overpay you would significantly reduce how much interest you'll pay over the whole term.

babyb06

I echo what has been said by others to be careful that your boyfriend can't claim to have an interest if you split up in later years. Yes, it might be rosey now, but things can change.

You need to ensure you have a proper agreement in place that it explicit he is paying you rent and knows that he doesn't have an interest in the property now, nor that the payments he makes each month will give him an interest in the property.

I would also advise that you pay all bills and maintenance (never let him pay towards improvements) and ask him to buy the food, so he could not in the future try and say he contributed to the house.

The rules are complicated - get a solicitor to draft the agreement!

Oh and I am a regular on the mortgage free wannabee section - if you can overpay the rent you receive each month rather than spending it on luxuries (which may be tempting) it will make a huge impact on your mortgage!

Good luck!

SilverSix

vanpiggy wrote: »

Thanks for all the helpful advice. It's difficult to know whether a tracker or a fixed rate is best, but I worry about the tracker mortgage going up.

And especially thanks re: the residential status of my boyfriend. Despite Evoke's ticking off I'm not trying to cheat any system, I just want to do things properly, fairly and for the best value!

There are mortgages available which will allow you to switch from tracker to fixed with no fee. Also when taking out a tracker mortgage they should explain to you how much extra each 1% rise in base rate will cost you per month.

There are pro's and cons to each. The tracker I have allows for unlimted overpayments with no charge and I can switch to fixed whenever I like penalty free. There was also no fee and a free valuation. I'd highly recommend overpaying by as much as you can comfortably, the amount you'll save in interest is massive and you'll reduce your term significantly.

There are decent deals about you just need to look

If you're not in the position to be able to afford payments when interest rates rise then stick with a fixed deal. However you'll be paying for the privilege when you may find come the end of your fixed deal despite interest rate increases it still would have been cheaper to be on a tracker.

Personally I'd only be fixing if it was for 5 years plus.

As for taxable income as mentioned £4250 is tax free. You'll only, as far as I know, pay tax on any extra on this that is profit. So after his share of bills has been deducted from the surplus on the £4250 whats left is taxable rather than the whole amount.

chewmylegoff

00ec25 wrote: »

that would still count as tax evasion - under the rent a room scheme it is the total income received, not what it is spent on - there is no difference between splitting the cost of the food or splitting the cost of the utility bills, it is still untaxed income received by the LL in connection with the fact the lodger is in occupation - the only reason the person is paying towards food is because they live there, if they didn't you won't get the contribution towards food or any other form of household expenditure.

all income received must be declared - do not commit tax evasion - anything received above £4,250pa is taxed. TYou are given the first $4,250 pa tax free allowance precisely to cover the fact it is spent on such things and would thus be a deduction against rental income if you used the "normal" method to caluclate the taxable profit on your renting out a room

this is right, but if they just take it in turns to do the weekly food shop instead, i can't see anyone at HMRC batting an eyelid about it.

also you won't necessarily need to declare anything - as long as the total amount you receive is less than or equal to £4,250 then no disclosure to HMRC is necessary.

00ec25

BennyC wrote: »

As for taxable income as mentioned £4250 is tax free. .

correct

BennyC wrote: »

You'll only, as far as I know, pay tax on any extra on this that is profit. So after his share of bills has been deducted from the surplus on the £4250 whats left is taxable rather than the whole amount.

sorry but that is fundamentally wrong.
The whole point of the rent a room scheme is you cannot claim ANY deductions against any of the income you receive. That is the whole point of allowing the first 4,250 tax free, it avoids having to account for deductions as you are not allowed to make ANY.

please re-read the rules here , notice the bit about before expenses... also 4th paragraph " provision of any other goods or services (such as meals,...)" contributuions to the food bill is the provision of goods ie food

as far as HMRC are concenred a co-habiting couple who share running costs suchg as food and utilies can operate tax free, but if you have a lodger paying rent that they are by definition not a co-habiting coipule - this is the popint the OP needs to note - a co-habiting couple sharing bills means the "partner" has a stake in the property which makes it potentially difficult when they split up