Buying house (no mgage) 'renting' to son questions

FBaby

If the main issue is slowing him to get on the ladder wouldn't it bee more helpful to help him with a nice deposit. Surely if he works and can afford some rent he should be able to get a small mortgage as long as he has a decent deposit (which I am charging is what he would be saving for in the first place). It would be better for him in every way.

Fire_Fox

nictry wrote: »

Please do not feel my response to fire fox reflects my desire to hear others opinions, I still feel his tone and content of his post was poor and seeing some of his other posts attract the same views I do not feel I was unreasonable in my response to him.

Anyway, I do not disagree with anything at all you have said and agree seeking legal advice is without doubt a good idea, I guess when thinking ideas through it is always easy to see the 'best' outcome and particularly when talking about your own flesh and blood, and yes with other children I do ask myself the same question on how to manage the situation again!

Re the tax/income issue, I am not too worried as the minimal amounts involved would not overly concern me but again my question was more a basic one of 20x50% tax again on what feels to be more of a 'interest/housekeeping' payment than a commercial rental situation (whether seen that way by HMRC or not)

I'm a she/ her. You are right some don't like my blunt/ brusque/ direct posting style, but that says just as much about others intolerance for different posting styles and assumptions as it does about my personality type. Most sentences can be read in more than one way, it's easy to read a totally non existent subtext. Sometimes statements of facts are statements of facts, questions are questions.

I have been on JSA within the last few years and have mental health diagnoses, this is said not as 'poor me' but simply as a statement of fact. It illustrates that it's a tad unlikely I would make derogatory comments or automatically have negative views about others in that same situation. Ergo anyone assuming such a subtext is wrong, they are making inferences that are simply not there based on their own prejudices.

I don't have a problem with you and I don't mind you posting your thoughts and opinions, this post is just me being my usual blunt/ brusque/ direct self. But I would ask you and anyone else reading to think about your intolerance to different personalities and posting styles, just as I do try to soften my posts.

00ec25

nictry wrote: »

Re the tax/income issue, I am not too worried as the minimal amounts involved would not overly concern me but again my question was more a basic one of 20x50% tax again on what feels to be more of a 'interest/housekeeping' payment than a commercial rental situation (whether seen that way by HMRC or not)

what matters in tax IS what HMRC thinks not what you may want to think

it is NOT a housekeeping payment - your son is living an independent life unassociated from you therefore you are his landlord not his father. As such it is your property rental business and you are required by law to declare your income and net profit

as you appear reconciled to paying 50% tax what is your problem?
Calculate your net profit and pay the tax like any law abiding citizen should do. It will be easy to set the rent at a level where the net profit is nil so you won't actually pay tax, but declare it you must.

joerugby

nictry wrote: »

Of course and why wouldn't I be? Not that this should matter if the house was purchased in joint names or am I missing something?

Yes you are. You are in need of some good legal and tax advice before you go anywhere with this idea

jmt

OP, we are/will be in a very similar situation in a couple of years time. Our child is an only child and we want to live as a couple nearing retirement - alone; none of this living with parents into your 30's.

Our plan is to sell the family home and buy two smaller places; one for us and one for child. We were not planning on charging any rent, but they would have to pay all associated bills. I cannot see how we will be liable for tax, we receive no income and our child will never need to claim housing benefit?

Why are somethings that appear so simple and done with the right intention frowned upon. I know that we never had a 'handout' like we hope to give our child, but we were fortunate to work from the day we left school and we have a good life.

seven-day-weekend

I can see why you want to do this. We too have helped our son get a flat, by gifting him the deposit. I personally think a great many of us are going to have to do this or something similar to help them get started.

Potential pitfalls - you are a Landlord, whether you take rent from him or not and will have to fulfil Landlord's obligations such as providing an annual Gas Certificate and Landlords Insurance. I think his name will have to be on the Council Tax.

Otherwise I personally can't see that there would be a problem - he is a member of the family living in a family home. If there was a mortgage it might complicate things, but otherwise I don't think it will. If you are not taking rent from him then I don't think you need to bother the Inland Revenue. If you are taking rent you will have to provide figures for the Inland Revenue.

If you come to sell, there will be a CGT liability.

Our son lived in our house for eight years while we lived in Spain, under similar circumstances, (rent-free) and he just got on and lived in it. There were not any problems about this. We did have LL insurance and a Gas Certificate and when he got a lodger we declared the lodger's rent to the Inland Revenue.

I personally don't see the problem.

Fire_Fox

jmt wrote: »

OP, we are/will be in a very similar situation in a couple of years time. Our child is an only child and we want to live as a couple nearing retirement - alone; none of this living with parents into your 30's.

Our plan is to sell the family home and buy two smaller places; one for us and one for child. We were not planning on charging any rent, but they would have to pay all associated bills. I cannot see how we will be liable for tax, we receive no income and our child will never need to claim housing benefit?

Why are somethings that appear so simple and done with the right intention frowned upon. I know that we never had a 'handout' like we hope to give our child, but we were fortunate to work from the day we left school and we have a good life.

There is a difference between letting your son live in the house free of charge but letting him pay all his bills, or taking money off him and paying the bills on his behalf as the OP suggested. The latter is not simple at all, it is needlessly complicated. The thing that has been frowned upon is proposing to 'spoonfeed' the son by paying his bills instead of him managing his own finances like any adult.

There are the same basic rules for everyone and rightly so IMO. Regular income is regular income and is potentially taxable whether it goes from parent to child, child to parent or stranger to stranger. However occasional cash gifts to your children are not taxable and they can be very substantial.

Things like insurance and safety certificates are there for the safety of the tenant or lodger, not to make the landlord or parents' life difficult. The contrived tenancy rules are there to protect the taxpayer, and the mortgage not letting to family rule is there to protect the lender. If there is no mortgage and no possible claim for housing benefit these don't apply anyway. Part of the reason there are rules is some people abusing the system, using their family to rinse benefits or practicing tax evasion.

00ec25

seven-day-weekend wrote: »

Our son lived in our house for eight years while we lived in Spain, under similar circumstances, (rent-free) and he just got on and lived in it. There were not any problems about this. We did have LL insurance and a Gas Certificate and when he got a lodger we declared the lodger's rent to the Inland Revenue.

if he was your son's lodger then you did not need to declare the rent as he was nothing to do with you. your SON should have declare the rent he received from his lodger. Congratulations for having got away with it

seven-day-weekend wrote: »

I personally don't see the problem.

that's probably because you are not as up to speed as you might be and you never got caught?????????????????

xylophone

Give your wife the money.
You wife lends the money to your son and receives the interest/capital repayment.
She inserts a clause in her will granting you the benefit of the loan repayment or, if you feel it would be more tax efficient, she has a clause in her will stating that the whole debt is forgiven in the event of her death.
Your wife gets a properly drawn legal agreement covering the arrangement and including a requirement that your son takes out life assurance to cover the mortgage.

observations_from_a_hill

I don't understand. Why not buy the new house/flat in the name of your son, & leave him to get on with his life. With your good income, why would you want to charge him notional interest - sorry, but it sounds like you want rid of him at no expense to yourself.