Buying house for Mother-in-Law to live rent free! Help please!

sleepless_saver

Peanuckle wrote: »

Bear in mind the restrictions on housing benefits if you're renting from relatives in relation to this bit.

Have a look at this thread about contrived tenancies which flags up some of the (complicated) issues.

You'd need a proper tenancy agreement and a commercial rent level set up at the outset, but that won't guarantee success with a subsequent benefit application.

getmore4less

thetonester wrote: »

Thanks once again.

You are correct. Deciding what to do is the whole problem. The inlaws are desperate to move but the decision is not all down to me unfortunately, the in-laws hum and har over everything I suggest . . . to say my head is in a spin is an understatement!

We have nearly paid off our mortgage on our own home so I was looking to borrow about 40K against our home and buy the other house outright. This is fairly easily given our current mortgage and I have checked with the bank already so the purchase could be failry swift and painless???

However, as I'm new to all this I wasn't aware you could claim back the mortgage payments on a rental property and therefore only get taxed on the profit from the rental? I'm so new to all this! Suppose that would obviously save a lot of money when compared to re-mortgaging my own property wouldn't it.

I'm going to have to research all that side of things now!

Thanks.

You can offset the interest on the rental income even if the money is borrowed on your own house.

The main issue will be do you want to become a "proper" landlord and all that entails rather than own a second home that family lives in.

With any property shared or otherwise you have to consider how maintanence will be paid and by who.

The real issue here is that they don't have the capital and income to live the life they want in the area they want.

This means you will be subsidizing it one way or another so have some of your capital or income tied up supporting them on the basis that you get their assets at some point in the future.


Have you considered a bigger property with annexe rather than a seperate property?

thetonester

Thanks for all the advice I appreciate this thread is dragging on a bit.
I'm still struggling a bit with what to do, but probably more so with trying to explain the whole raft of options, pit falls and tax implications etc to a retired welder and cleaner!!

Stewza

Hi

I am in a very similar situation. My parents have sold their house, and I am going to move to a bigger house and my parents are going to move in to my current house.

I am thinking my parents gift me 155,000, I clear my current mortgage and they live there rent free.

I understand the issues previously discussed regarding IHT and CGT implications and if they need future care. The area I would like clarification on is this...

I also have a separate buy-to-let and I currently make a small profit which I therefore pay tax on. If my parents are living rent free in my current house (which I cleared the mortgage on using their gift) can I use that loss to offset the profit on my other BTL and make a net loss saving me the income tax?

Thanks
Your thoughts appreciated.

nomunnofun

Stewza wrote: »

Hi

I am in a very similar situation. My parents have sold their house, and I am going to move to a bigger house and my parents are going to move in to my current house.

I am thinking my parents gift me 155,000, I clear my current mortgage and they live there rent free.

I understand the issues previously discussed regarding IHT and CGT implications and if they need future care. The area I would like clarification on is this...

I also have a separate buy-to-let and I currently make a small profit which I therefore pay tax on. If my parents are living rent free in my current house (which I cleared the mortgage on using their gift) can I use that loss to offset the profit on my other BTL and make a net loss saving me the income tax?

Thanks
Your thoughts appreciated.

In essence you are wishing to claim tax relief as a result of allowing your parents to live in your current house without paying rent.

Regardless of what anyone thinks of the morals of this or otherwise, the fact remains that your current house is being let out at less than commercial rent. You can claim expenses up to and including the amount of rent received which, in your case, is NIL.

http://www.hmrc.gov.uk/manuals/pimmanual/pim2220.htm

00ec25

nomunnofun wrote: »

Regardless of what anyone thinks of the morals of this or otherwise, the fact remains that your current house is being let out at less than commercial rent. You can claim expenses up to and including the amount of rent received which, in your case, is NIL.

nicely put :T

Delphina

Re the OP's case

As an option, based on the fact that I don't know the tax rates that you and your wife pay, etc:
if you want to charge rent on your own house that you share with the in-laws, but prefer to avoid paying tax on the income, you and your wife can jointly charge no more than £4250 PA, under Rent A Room Scheme. I think you or both of you (if the house is jointly owned) do need to submit Self Assessment tax returns every year for this though. It should be quite easy to file a tax return, in this situation, anyway. So you should not need an accountant. When you start renting out the house, you need to notify HMRC.

http://www.hmrc.gov.uk/helpsheets/hs223.pdf

I am no expert on Capital Gains tax... If you have to pay tax on the rent and claim expenses such as mortgage interest payments, will the profit from selling this house be subject to Capital Gains tax when you sell it, taking into account PPR (you always live there) and rent reliefs.

If there is enough space and Local Council allows, building an annexe could be cheaper than selling your current home to buy a new one.

I personally prefer an annexe or buying a bigger house together than lending / gifting money to the in-laws to buy their new house. I think it is less complicated. But I would not even be sure to live under the same roof with my own mother everyday, so the annexe would be my only option. LOL... As long as you share the same entrance with your 'lodgers', Rent A Room scheme should work for you!

00ec25

Delphina wrote: »

Re the OP's case

the OP's case was over a year ago (OP is Dec 2012) so is most probably sorted by now...

Delphina

00ec25 wrote: »

the OP's case was over a year ago (OP is Dec 2012) so is most probably sorted by now...

Oic. Haha... I didn't look at the date... Too much wine, maybe. Thanks.

kidmugsy

thetonester wrote: »

Why oh why is nothing in this life simple?????

Because there are so many rogues around.