Letting my house to pay the rent on my accommodation

StillBlue

I currently have my own business, and I am also a home owner (well 50/50 with the bank!), but I am currently letting out my house in order to rent a house closer to my work (as it is likely to only be a few years).

Unfortuantely the rent from my house is classed as income even though it is going towards to rent for the house I am living in.

This is not good as I am on a very low income at the moment from my struggling business, and obviously being taxed on the income from my house doesnt help.

To put it simply, is there any way (even using the business to rent the houses?) that I can stop the income from my rented house being income?

I have spoken to my accountant, who said he doesnt think so, but I am sure there must be lots of people who come across this issue, and wondered if anyone had found a way?

Like I say, I just dont want the rent from my house, which is going straight towards renting my accommodation (which it doesnt fully cover anyway), being classed as income.

Thanks

molerat

How would the business be able to rent out your personal house, I do not think your lender would be happy with you trying to sign the house over to the business. I do not think there is any legit way of doing it, are you making that much more rent than your expenses as to make it a serious tax issue ?

StillBlue

The problem I have is that I am the director of the company, so not sure that I can claim any of the rental of my accommodation (which I do use for an amount of the business), as an expense.

Therefore the £550 a month I get in rent for my house almost doubles the wage I am currently able to draw from the business which at the moment is dedicated more to paying staff than it is me.

Although that still only brings me into a low amount of income tax, the big problem is the loss of Tax Credits, which currently I am quite dependant on while things are hard.

All in all, it makes my living almost impossible at the moment, as like I say all of the income from renting my house, plus some of my income from the business gets swallowed up into renting accommodation at my businesses site, leaving not really enough to pay mortgage, services, food etc. Gradually I am eating into my very small amount of savings.

With regards to the lender, I can see they probably wouldnt be happy, as I guess I would have to let the house to the business at a 6 monthly peppercorn, then have the business sublet it, which all in all sounds likely to be against their terms.

StillBlue

The rented house I am currently living in, is necessary for me to live in to perform my duties properly..........

So, as long as I can prove that (which I can), I guess that would make it come under the exemptions relating to benefit in kind.

But I dont know about the renting my house to the company below the market rate in order for them to sublet it at market rate.

agrinnall

StillBlue wrote: »

But I dont know about the renting my house to the company below the market rate in order for them to sublet it at market rate.

Your mortgage provider is very unlikely to allow this, they will normally want to see a rental agreement at 125% of the mortgage payments.

CLAPTON

no there's not way of doing this

millions of people pay rent without the taxpayer subsidising them
millions of people pay mortgage interest without the taxpayer subsidising them

you are getting mortgage interest subsidised by the taxpayer because that's a business; there is no way your own rent can be subsidised

ceeforcat

StillBlue wrote: »

The rented house I am currently living in, is necessary for me to live in to perform my duties properly..........

So, as long as I can prove that (which I can), I guess that would make it come under the exemptions relating to benefit in kind.

You will not succeed - as an employee of your company the expense must be wholly, necessarily and exclusively incurred in the course of your employment - it is not!

StillBlue

I think perhaps I am missing something here.

I own a house which I would be living in if geographically it was in the right area for me to easily run my business, which employs others.

However, where time are hard, for me to continue to employ people and keep the business running, I am having to be on site 16 hours plus a day every day, this really requires me being able to sleep on site.

This is why I have rented out my house, and I am renting a house on site.

Currently after everybody else is paid, I can only draw a very low wage. I could claim a small amount of tax credits, which would keep me afloat if the income from renting my house (which goes towards to rent needed for the accomodation I am living in), was not classed as an income. If I do not do something along these lines and claim a small amount of Tax Credits, I currently cannot afford to live, due to mortgages, council tax, services etc coming to more than I can draw out of the business at the moment.

I am just trying to find a way to keep the business going during these hard times, and keep others employed, as I dont want to be laying people off when there are so few jobs, but I dont want to lose everything myself either.

I am guessing perhaps best if I sell my house, and buy the one I am renting, although in the long run this is not really in my interest, in the short run it may help.

I am not trying to do a fast one here, I am trying to find sensible alternatives to stop myself and my employees losing out.

CLAPTON

please don't think people here are unsympathic but you are simply providing yourself somewhere to live just like anyone else

if you were actually living in your 'owned' home you would not get tax relief on your interest; however now you do because it's a business now
if you simply lived in a rent home you would not get tax relief on your rent; you are doing this in the same way as anyone else

so you are basically in the same position as everyone else; each of us has to have a private residence for which we do not get tax relief either for the interest paid or on the rental

StillBlue

I am still slightly confused about what you are saying, but I get the feeling you are saying this is more in depth than I thought.

I get no tax relief on the one I am renting at the moment as it is just a normal private let.

My private house rent I will be taxed on, which is fair enough.

What the problem is that is occuring, is that living in my own house, my earnings the last few months have been so low, that I have been able to apply for tax credits, which means I can pay the bills.

Now that my house is rented, and is providing an income to cover my rent, I can no longer apply for tax credits (even though in the long run I am even shorter of money than before).

A friend of mine works for a Forestry Commission, and is provided a house on site, which is not classed as income as it becomes an exemption if the accomodation improves your ability to do your job.

Maybe I am thinking too complicated here, perhaps if my company was to stop paying me a wage, but could provide the rented accomodation in the above mentioned way, and instead my wages was to become that generated by renting my private house? The figures would work for me at that.

I think this is perhaps something to give my accountant to think about again.

gibson123

Consider Re-mortgage your house and transfer to a buy to let mortgage. Make your rented accommodation your main home. You will still pay income on your rent but see if by off-setting your interest payments, letting fees and maintenance costs whether this is a more financially viable option.