Rental income regarding benefits

Watham976

Hi all - I am new to this forum so hello and hope this post is in the right place..:- . My partner and I are living together with 1 18mth old child. We both work although in the low income bracket. We receive child tax credits which help with nursery fees but nothing else. We own the house we are living in. We are living in birmingham and all our family is in the south.

We would like to move closer to our family and our idea is to rent out our property which will just cover the mortgage . We would then rent a property nearer our family and where we have work offers. We would let the house tick over until we were in a position to buy in the south. This may be a very long time.

So that is the plan... The question we would like to know is how this rental income would effect child benefits and also means tested JSA if either if us was out of work at any point. Is it classed as income? Or only the amount left once the mortgage is paid? would we have to sell the house to pay for our rented accommodation elsewhere?

rogerblack

Any house you do not live in, and do hot have on the market will be treated as capital.
This will eliminate means-tested JSA, and most other benefits, unless your equity in the property is under 6K or so.

Watham976

Ok thanks. It was my previous understanding that it was only the difference after mortgage payment that was counted as income.

So if rent was £750 - mortgage £500 = £250 income to declare . Is this not correct? This is in regards to child tax credits only?

rogerblack

Watham976 wrote: »

Ok thanks. It was my previous understanding that it was only the difference after mortgage payment that was counted as income.

So if rent was £750 - mortgage £500 = £250 income to declare . Is this not correct? This is in regards to child tax credits only?

It's not income that matters in this case - it's capital.
If the amount of assets you have exceed 16K - you are not entitled to most means-tested benefits (like JSA).
In addition - as I understand it - £250 income would totally wipe out JSA anyway.

Housing_Benefit_Officer

We look at 2 things:-

Rent minus mortgage and expenses = income.

Capital value minus outstanding mortgage (minus 10%) = capital.

Watham976

Thanks for the help

angelsmomma

Don't forget also that only the mortgage interest is allowed as a deduction not the capital repayment.

Housing_Benefit_Officer

angelsmomma wrote: »

Don't forget also that only the mortgage interest is allowed as a deduction not the capital repayment.

No it is the mortgage payment.

BigAunty

angelsmomma wrote: »

Don't forget also that only the mortgage interest is allowed as a deduction not the capital repayment.

Perhaps this formula is required just to calculate income tax due to the HMRC from the rental income?

The OP should look into tax returns for landlords (see the Landlordzone website for info on tax) and the effect of capital gains tax should they decide to sell the property in the future after it has been rented out (see the HMRC website), not just the impact on their benefits.