Charging rent

caryn14

I own a second property as rental income, that is separated into 2 flats, but is currently empty.

Neither of my kids yet own property of their own and I am considering moving the pair of them out of our family home into the rental property. Do I have to charge them rent and if I don't and let them live there rent free, am I still liable for tax or any other charge from local authorities, calculated on the assumed rent received at the going rate?

What implications might there be if we go ahead with this idea?

Thanks for your help

thesaint

You don't have to charge rent.
What are you trying to achieve?

dc197

The (council) tax on the flat would be based on its value, not its rental income. So there would be no council tax implications for charging under market value rent.
In fact if the empty flat is past its empty grace period and you are paying full council tax on it, and if kicking the kids out means you become eligible for the single-person discount in your main home, and if you don't intend to pay their other bills, you could save money.

MerrilyA

If you have no mortgage you can let your children rent out the flats, the council tax will still need to be paid.

If you have a mortgage it may be challenging to let your children rent your property, you can talk to your mortgage lender.

You mentioned you rent the flats are for the income so if you don't charge rent will that be a problem? That will be for you to think about.

CIS

dc197 wrote: »

The (council) tax on the flat would be based on its value, not its rental income. So there would be no council tax implications for charging under market value rent.
In fact if the empty flat is past its empty grace period and you are paying full council tax on it, and if kicking the kids out means you become eligible for the single-person discount in your main home, and if you don't intend to pay their other bills, you could save money.

I'd also add that if the property with the two units is banded as one for council tax then it was fall as a HMO for council tax purposes and the OP would be liable for the council tax charge in his name.

If it's currently banded as one dwelling and the flats are self-contained then they should be banded individually for council tax purposes.

Craig

whowants2brich

Council tax and the local authority isn't all that you need to worry about.

Doesn't HMRC have something to say about this exact thing?

I was under the impression that if you don't charge your daughters normal market rate - or if you charge them significantly less than market rate (or nothing at all) - then they treat the saving by them as if you were making a financial gift?

eg if you rented out the 2 bed property for £500 per room, you should either get £500 per daughter, or HMRC will assume that you are gifting them £500 per month - £6k each, per year.

This could have an implication if you were to die in the next 7 years, as this would become liable for IHT.

I'm sure that some wiser person on this forum will respond, and correct me if I'm wrong.

(If I am wrong, I may be tempted to benefit from exactly the same as this, but I think that this is the exact reason why I haven't yet done it!)

anselld

whowants2brich wrote: »

I'm sure that some wiser person on this forum will respond, and correct me if I'm wrong.

Not that I claim to be wiser, but you are completely wrong.

There are no tax implications of allowing relatives (or anyone else for that mater) to live rent-free.

I suspect you are thinking of gift with reservation but in this case there is no suggestion of gifting the property itself.