Universal credit tax credits & buy to let home.

makavelianz

I need to know whether i will be affected as i have a home which i let with a mortgage that is covered by the rent and leaves me with a £100 profit a month, which i declare for tax credit/ child tax credits purposes. how will i be affected under universal credit system? house is worth 100k with 50k mortage. am i expected to sell the house to relaease the quity as i am living home with parents at the moment.

Icequeen99

When you say that you have £100 profit after the mortgage, is that the figure you put on your tax return. Only the interest part of the mortgage is deductible for tax (and therefore tax credits) purposes.

My understanding is that the 'second' home would be regarded as capital for UC purposes, therefore putting you outside of the capital limits. There is a possibility of transitional protection on the transfer to UC, but not everyone will qualify for that.

IQ

makavelianz

basically my mortgage payment on that house is 350 a month and i recieve 450 a month. i was hoping to stay with parents another few years before i move out. looks like a drastic change.

Tobermory

Icequeen99 wrote: »

There is a possibility of transitional protection on the transfer to UC, but not everyone will qualify for that.

IQ

Do you have some background information as to who would qualify for transitional protection and who would not ?

skintandscared_2

So, just to clarify, you have £50k equity in a property but live off benefits?

princessdon

skintandscared wrote: »

So, just to clarify, you have £50k equity in a property but live off benefits?

Don't be silly - tax credits are not benefits you know!

sweetietot

Is the mortgage interest only?
Are you also declaring your income from the property for income tax purposes?
As Icequeen99 stated, only the interest portion is deductible from your income, not the capital amount

leveller2911

skintandscared wrote: »

So, just to clarify, you have £50k equity in a property but live off benefits?

Its an interesting question you pose.

Hopefully someone will clarify if it would be the case that having £50k equity in a rented out property means they can claim benefits but someone who has saved £50k in ISA,s etc can't claim?.

princessdon

leveller2911 wrote: »

Its an interesting question you pose.

Hopefully someone will clarify if it would be the case that having £50k equity in a rented out property means they can claim benefits but someone who has saved £50k in ISA,s etc can't claim?.

Currently you can be a milliionaire and as long as your money was in a none interest bearing account it wouldn't matter. For Tax Credits they only look at actual interest (not assumed) from capital and even then the first £300 is disregarded.

Because at the moment they are a "credit of tax paid" - which is something they have not been in reality for many years.

tomtom256

leveller2911 wrote: »

Its an interesting question you pose.

Hopefully someone will clarify if it would be the case that having £50k equity in a rented out property means they can claim benefits but someone who has saved £50k in ISA,s etc can't claim?.

Well it would be easier to get at the ISA then the equity in the current housing market.

skintandscared_2

leveller2911 wrote: »

Its an interesting question you pose.

Hopefully someone will clarify if it would be the case that having £50k equity in a rented out property means they can claim benefits but someone who has saved £50k in ISA,s etc can't claim?.

That was precisely what I was thinking! If savings over £16k mean you lose benefits, how does £50k in equity work?!