Does money from my Mum count as rental income?

Gallery2084

I bought a house with a mortgage. My Mum lives in it and gives me money every month to cover a portion of the mortgage, and pays all of the bills herself. I live on a boat. As far as the bank and insurance company are concerned I do not need to siwtch to a buy to let mortgage or get permission to let as my Mum is an immediate family member. The complicated bit is that she wants to apply for universal credit, thus stating on the universal credit form that she pays me rent.

My question is:

When my tax return form asks 'Do you receive income from any property?' do I need to tick 'Yes'?

I know if it was a normal tenant it would be yes, but I'm just wondering if it's different if it's my Mum? I don't want to have to pay more tax on the 'income' so Mum can claim a benefit as it wouldn't make sense.

TIA

le_loup

If she pays you rent - she pays you rent. To claim to be paying it to one agency and you telling another that she doesn't can only lead to trouble.

anselld

You should declare the rent regardless of the benefit claim. You can of course deduct expenses so if she pays you less than the interest element of the mortgage there will be not tax to pay.

Your Mum may find it is treated as a "contrived tenancy", ie not eligible for HB but that does not stop your own tax liability.

00ec25

Gallery2084 wrote: »

When my tax return form asks 'Do you receive income from any property?' do I need to tick 'Yes'?

yes - you receive an income from a property you own. That is the quintessential meaning of the word: rent.

as others have said, for tax purposes you may have some costs which you can offset against that income to produce the net profit figure upon which you will be taxed.

if you have not been declaring this up until now then come clean with HMRC before they find out and penalise you for deception.

Gallery2084

Thanks guys.

All i meant is, my Mum is just giving me money to help me out, as she is entitled to do much like any parent is able to give money to their child without it being taxed. I'm sure many people receive much more then 450 pounds a month by their parents. The fact I am allowing her to live in my house has nothing to do with the money she gives me. It is only 'rent' once we declare it so on universal credit form to try and get my Mum the financial help she needs, but it seems that if I will be worse off then there is no point as I won't be able to help her out as much financially if I am getting taxed more.

I will however look into the amount my mortgage interest is and see if it is more than my Mum gives me, as that expense canellation may help. I thought they were stopping the ability to claim mortgage interest as an expense though?

00ec25

Gallery2084 wrote: »

Thanks guys.

All i meant is, my Mum is just giving me money to help me out, as she is entitled to do much like any parent is able to give money to their child without it being taxed. I'm sure many people receive much more then 450 pounds a month by their parents. The fact I am allowing her to live in my house has nothing to do with the money she gives me.

there is little point in you asking questions if you stick your fingers in your ears and go LA LA I'm not listening when given answers

Gallery2084 wrote: »

It is only 'rent' once we declare it so on universal credit form to try and get my Mum the financial help she needs, but it seems that if I will be worse off then there is no point as I won't be able to help her out as much financially if I am getting taxed more.

you do not live in the same house as your mother. Therefore what she pays you is rent. It is NOT a contribution towards shared household expenses. Her biological connection with you is irrelevant in the context of you and her not sharing the same house. You are each running your own households, in her case she pays you RENT in return for being allowed to live where she lives, in a house you own but do not yourself live in.

Gallery2084 wrote: »

I will however look into the amount my mortgage interest is and see if it is more than my Mum gives me, as that expense canellation may help. I thought they were stopping the ability to claim mortgage interest as an expense though?

you are wrong regarding mortgage interest. The changes impact only those who fall into the higher rate income tax bracket. If your pre tax income (incl salary and the rent) is <£45,000, you remain a basic rate taxpayer and the mortgage interest is allowable in full.

Gallery2084

Thanks a lot for your response.

there is little point in you asking questions if you stick your fingers in your ears and go LA LA I'm not listening when given answers

I am not doing that but simply questioning what you are saying as I'm not sure you're right.

you do not live in the same house as your mother. Therefore what she pays you is rent. It is NOT a contribution towards shared household expenses. Her biological connection with you is irrelevant in the context of you and her not sharing the same house. You are each running your own households, in her case she pays you RENT in return for being allowed to live where she lives, in a house you own but do not yourself live in

My Mum would be able to live in that house regardless of how much she gave me, whether she gave me zero or covered the full mortgage. In a few years when she retires I will be paying the whole mortgage. I'd be asking for probably 1200+ a month to rent to someone else whereas my Mum gives me 450. I bought the house so she could live in it as I already have a boat.

My point is simply that tax/gifting rules are different for family, which is why the bank doesn't see Mum as 'renting' so i don't need permission for her to live there. If i rented to anyone else I would need a formal, commercial contract in place, to charge the going rate, take a deposit and promise evitction if they should falter on payment. I am well aware that I could say I receive income from her but I don't beleive in the eyes of the law I am required to in this instance. Everything I have found regarding parents giving children money suggests that I do not need to decalre it as income. The fact that I allow her to live in my house has nothing to do with it as long we don't bother with a universal credit application and make it all offical with a commercial tenancy, which was the only complicated bit as far as I can see.

My original question has been answered however so thank yo all very much. My mortgage interest is only 350 pcm so it will not be worth applying for universal credit as i'll be worse off.

Mojisola

Gallery2084 wrote: »

My Mum would be able to live in that house regardless of how much she gave me, whether she gave me zero or covered the full mortgage.

Which means it's a contrived tenancy and she won't be able to claim any help with paying the rent.

le_loup

Gallery2084 wrote: »

My point is simply that tax/gifting rules are different for family

No they are not. What is different is tax/gifting between spouses.

anselld

Gallery2084 wrote: »

Mum gives me 450.

Gallery2084 wrote: »

My mortgage interest is only 350 pcm

So you have an income of £100 pcm less any other allowable expenses.

Gallery2084 wrote: »

so it will not be worth applying for universal credit as i'll be worse off.

As already stated any benefit claim is irrelevant, you are already liable. You will be even worst off if HMRC catch up with you before you stop being in denial.

Hopefully you also appreciate you are building a potential CGT liability when you come to sell.

molerat

And I do hope you have all the relevant gas safety certificates etc.