Rental Income - Help required

Ji-Unit

In April 2012 i was sent out to South Africa to work and left my home behind in the UK empty.

My brother is currently 'babysitting' the house for me (since June 2012) and pays me £500 a month for the pleasure. He's basically just chipping in to cover his costs/bills while im away, this is not a fully blown rental agreement. There's no contract, no nothing, just my brother helping me out.

I am not very financially savvy and thought nothing of it, then someone asked if im declaring the income.?? This panicked me a bit.

Reading online has confused me a little, so i would like some advice.

It all talks about profit ie income - expenses. Well currently i dont make a profit (thats not the idea, its just income to cover his bills).

Currently my utility bills including stuff like service charge, gas and electric etc come to around £370 a month. The interest on my mortgage is about £400 a month. So consequently im making a loss of about £270 a month.

Do i need to declare this at all? Reading online if its below a profit of £2500 a year then i just need to inform my tax office and its dealt through my PAYE account?? As im making no profit, and he's literally just paying for bills do i need to do anything at all?
I don't really see how this is any different to paying board? Surely parents don't declare income from their children if they are paying their way?

Finally if i do need to declare, as it started in the tax year of 12-13 i presume i don't need to declare until Oct 13 by post of Jan 14 online?

Any help would be much appreciated!

G_M

He is paying you rent. You are a landlord. You must complete a tax self assessment form and declare the income.

By the sound of it there will be no tax to pay since your allowable expenses = the rent, but you still have o declare the income to HMRC

See the appropriate links (BOTH of them as you are overseas!)for HMRC in this post here.

Make sure you comply with the other laws too:

* your insurance is probobly invalid
* you may be breaching your mortgage temrs (if you have one) unless you have CTL
* have you got an annual gas safety certificate?

etc etc - see the post above

(You really are a landlord)

RAS

As above, plus if you are not living in the UK, you have to give your brother a certificate to prove that you are dealing with the HMRC, or he has to deduct 25% tax and pay them.

G_M

As the rent is in the tax year 12-13, does that mean i don't have to declare to the HMRC until Oct 13 (paper) or Jan 14 (online)?
Can't confirm the exact dates offhand, but basically, yes.

Also if my brother was to pay the bills direct, ie i was not to receive any income, does that change anything?

If he pay you absolutley nothing in return for the accomodation, then yes, there is no tenancy.
But be aware payment does not have to be cash. If, for example, he had agreed in return for living there to do up the property (redecorate, install new kitchen/central heating etc) that would constitute rent. Even if you paid for the materials (paint, kitchen units, boiler) his labour would constitute rent.

ie if YOU get something in return for HIM getting something....

Additionally, even if you go down this route so as to nullify the contract/tenancy, you should still check

* your insurance
* your mortgage terms
* your lease (if relevant)
* and for the sake of £60 I would get a gas safety certificate as well

sequence

Are you sure there's no profit ? The repayment part of the mortgage isn't counted as an expense, and I'm not sure how utilities comes into it, are bills included in the rent ?

vectistim

RAS wrote: »

As above, plus if you are not living in the UK, you have to give your brother a certificate to prove that you are dealing with the HMRC, or he has to deduct 25% tax and pay them.

For this see the Non-Resident Landlords section of the HMRC websty.
http://www.hmrc.gov.uk/international/nr-landlords.htm

silvercar

Ji-Unit wrote: »

My brother ..... pays me £500 a month ....chipping in to cover his costs/bills while im away, this is not a fully blown rental agreement.
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Currently my utility bills including stuff like service charge, gas and electric etc come to around £370 a month.

Sounds to me that he is just paying keep rather than rent.

I don't really see how this is any different to paying board? Surely parents don't declare income from their children if they are paying their way?

Exactly. There is no requirement to declare adult children paying keep to the revenue.

Werdnal

Whats with the "my utility bills"? Bills should be in your brother's name as he is the consumer of the utilities and therefore the customer!

Also, have you advised your mortgage lender and insurer you are no longer living there? Nothing like a devastating fire and the fact that the Policy holder they assumed was the occupier is living 1,000's of miles away to prompt your insurer to invalidate their cover!

G_M

silvercar wrote: »

Exactly. There is no requirement to declare adult children paying keep to the revenue.

1) OP is non resident

2) Brother is not 'child'.

3)

My brother is currently 'babysitting' the house for me (since June 2012) and pays me £500 a month

this is a fixed amount. Utility charges vary.

Kynthia

Ji-Unit wrote: »

It all talks about profit ie income - expenses. Well currently i dont make a profit (thats not the idea, its just income to cover his bills).

You may not make a 'cash' profit but you may be making a 'taxable' profit. Therefore you need to understand what expenses are allowable for reducing your tax liability.

Ji-Unit wrote: »

Do i need to declare this at all? Reading online if its below a profit of £2500 a year then i just need to inform my tax office and its dealt through my PAYE account?? As im making no profit, and he's literally just paying for bills do i need to do anything at all?

ALL untaxed income needs to be declared to the HMRC, even if youn aren't making a profite. You're also mistaken regarding the £2500 limit for needing to declare through self assessment, it's the income limit not profit limit, and you take in more income than this a year. Therefore you need to declare through self assessment.

Ji-Unit wrote: »

I don't really see how this is any different to paying board? Surely parents don't declare income from their children if they are paying their way?

It's very different because you don't live at the property with your brother. Even parents would need to declare income from their children renting a property from them unless no rent was paid at all. If you live together with family you are a household and therefore money given is not taxable rent but a contribution to the running of the household. However your brother has your property to himself and therefore has a tenancy, even if there isn't a paper contract.

As others have stated you are a landlord and must comply with your legal requirements. You must declare the income, pay the tax as non-resident LL, get a gas safety certificate, tell your mortgage company and building's insurer and protect the deposit if you were given one.

Ji-Unit

Kynthia wrote: »

You're also mistaken regarding the £2500 limit for needing to declare through self assessment, it's the income limit not profit limit, and you take in more income than this a year. Therefore you need to declare through self assessment.

Are you sure??? The HMRC seems to says otherwise...


"£2,500 or more from property (after deducting allowable expenses)"

I know that the interest portion of my mortgage is £400 a month alone, so no way am i making an annual profit of £2500.

Would you suggest still to fill out a SA form, or is it easier / better to do it through a P810 form?


I've rang my mortgage lender, and as im on a 3 year fixed product, they will give me a CTL with no rate changes or additional fees. My fixed mortgage is until Oct 14, and i will have returned by then. I presume i just let them know / prove when im back and i drop back onto my fixed rate??

However that was all verbally on the phone, ive returned the application form they sent out after the phonecall. It was a very basic form where i just had to state my address and what i expected the tenancy agreement to be. I presume that will get processed and they'll send me further forms to sign with the exact deal detailed?

Without the CTL finalised yet, would you recommed i wait until it is finalised before chasing up insurance? I presume i would have to go for Landlord if i got the CTL? My home insurance is with my mortgage lender. As i live in a flat, my buildings insurance is covered by the service charge i pay. Will that make things more difficult or easier?

Apologies for all the questions, but responses would be greatly appreciated!