Renting to Parents & Tax

trailingspouse

Some questions for you to think about - sorry if they seem harsh.


- what if your Dad's partner outlives him - would you want to be still in this arrangement, bearing in mind she's not a blood relative?
- what if you pre-decease them? Would your husband still want to continue the arrangement?
- what if your financial situation changes and you really need to sell this house?
- what if you and your husband divorce? Could you afford to continue this arrangement without your husband's financial input?
- what about when their needs increase, perhaps one of them needs residential care but the other doesn't? How would they fund it?


If you weren't around to help them out, what were their plans? They've got 75 years of stuff - and they've had 75 years to answer that question.

Keep_pedalling

Their current HA can’t help, but what about others in the area? Many HAs offering SH have properties with more than a single bedroom.

FredDogsMum

xylophone wrote: »

Does the mortgagee know that you intend to rent out the property and to a relative?

Who is going to be responsible for insurance and water/power/council tax etc?

Yes the Mortgage company are fine with this as we do not need their rent to pay the mortgage. If they could not pay then we could afford to pay this ourselves.

They will be paying utilities. We will do building insurance. They pay their own utilities now. Although they are in sheltered housing neither gets any benefit.

FredDogsMum

trailingspouse wrote: »

Some questions for you to think about - sorry if they seem harsh.


- what if your Dad's partner outlives him - would you want to be still in this arrangement, bearing in mind she's not a blood relative?
- what if you pre-decease them? Would your husband still want to continue the arrangement?
- what if your financial situation changes and you really need to sell this house?
- what if you and your husband divorce? Could you afford to continue this arrangement without your husband's financial input?
- what about when their needs increase, perhaps one of them needs residential care but the other doesn't? How would they fund it?


If you weren't around to help them out, what were their plans? They've got 75 years of stuff - and they've had 75 years to answer that question.

Thank you for the thoughts:-
Yes we are happy to do this long term for Dads partner too if she out lives him.
Yes husband happy to do this for both of them if I pre-decease them both. We are also going to also change our wills so if we were both to pre-decease them then the arrangement would continue.
We can not envisage any circumstances where we would need to sell this house.
Even if we were to divorce -This arrangement would still be fine.

The idea behind charging them a higher than we need rent now is to build up a fund so that when there is only one of them then the extra money they have paid will ensure that we can continue to provide this home for the one that is left behind without it affecting our own financial situation.
Obviously we don't have a crystal ball, have no idea how long each or we will live and what the property market will do so know that their is an element of risk or reward attached to this plan.
Ultimately what we want to achieve is to provide them with somewhere better to live together without it costing them or us anything extra.

Thrugelmir

FredDogsMum wrote: »

Yes the Mortgage company are fine with this as we do not need their rent to pay the mortgage.

That's not the only issue from the lenders point of view. .

FredDogsMum

Keep_pedalling wrote: »

Their current HA can’t help, but what about others in the area? Many HAs offering SH have properties with more than a single bedroom.

TBH - We haven't looked. Having realised that there is a way for us to financially do this with just the risk or reward element being the only financial implication for us. We decided that we would rather do this ourselves. This way it free's up in their case 2 flats that other people can have.

When Dad went into SH there was no alternative and we were very grateful for what they were able to offer.

Red-Squirrel_2

FredDogsMum wrote: »

TBH - We haven't looked. Having realised that there is a way for us to financially do this with just the risk or reward element being the only financial implication for us. We decided that we would rather do this ourselves. This way it free's up in their case 2 flats that other people can have.

When Dad went into SH there was no alternative and we were very grateful for what they were able to offer.

Finances aren't the only implication though.

Sheltered housing provides things you may not be able to give them in a private home. There are staff available to help, everywhere is accessible, communal areas with social events happening, services that can be bought in as extras.

They might not be using much now, but if they live till they are very old, that will probably change. Sheltered housing is a great place for an older but still independent couple to be and can delay or even remove the need for a care home further down the line.

Sibz

FredDogsMum wrote: »

Yes the Mortgage company are fine with this as we do not need their rent to pay the mortgage. If they could not pay then we could afford to pay this ourselves.

So - its all just to dodge tax. The tax you'd pay on the rent income would be less than paying the whole thing (which you say you could afford).

Slithery

FredDogsMum wrote: »

We are funding this from some savings and the rest is being mortgaged with a mortgage for a second property not a buy to let mortgage.

So to make this financially possible we are thinking of charging them the same rent they pay now

One idea I had but not sure if its okay would be for us to charge a small rent then for my dad to give to me a regular amount of money each month on the basis that it is money he does not need. Which I understand is legal as long as he writes to the tax man and tells him. Anyone ever had any dealings in that.

So you're contemplating mortgage fraud as well as tax evasion.

Not only do you need a BTL mortgage, as you're renting to a family member it will need to be a regulated BTL which will cut the pool of lenders even further and come with even tighter restrictions than a normal BTL mortgage.

FredDogsMum

Red-Squirrel wrote: »

Finances aren't the only implication though.

Sheltered housing provides things you may not be able to give them in a private home. There are staff available to help, everywhere is accessible, communal areas with social events happening, services that can be bought in as extras.

They might not be using much now, but if they live till they are very old, that will probably change. Sheltered housing is a great place for an older but still independent couple to be and can delay or even remove the need for a care home further down the line.

Red - I hear and respect what you are saying and agree. In a different place this may have been a consideration but without going into too much personal detail in their circumstances a lot of what you have said does not apply. So this truly is the best option for them.