Dependant Relative Mortgage and Income Tax

MaryA144

I am in the process of purchasing a flat for my daughter to move into using my own savings, supplemented by a Dependent Relative Mortgage. My daughter will not pay rent but will make the monthly mortgage payments. My question is, will I have to enter these payments as rental income on my tax return? The mortgage will be paid from my bank account and my daughter will transfer the monthly payments to my bank account to meet these payments.

I have seen various posts on a number of forums, some say the second property is viewed as a private residence (second home) as it's being used by a relative. Others that you have to treat the payments as rental income even though they are going towards paying off the mortgage essentially treating it as a BTL for tax purposes.

Any help greatly appreciated.

Thrugelmir

Purchasing a second property will result in your being liable for CGT if you sell the property and accounting for tax on any income received for letting the property. Income tax will be calculated on the net profit, i.e. income received less allowable tax deductible expenses.

The fact that is your daughter that will be renting makes no difference.

opinions4u

I would post on the "Cutting Tax" part of this forum.

If the property is bought in your daughter's name with you as guarantor that may avoid some of the tax issues.

It may even be worth paying a few hundred pounds for the professional advice of an accountant.