rental property & income tax

angelwitch_2

My OH's dad owns a house, however he transferred the morgage to my OH approx 18 months ago. We live in a rental property, while the house with the morgage in his name is rented out, at a rate which basically just pays the morgage. OH's dad has said that we don't need to pay income tax on the rent we gain from the house as it isn't a second property. However, after some snooping around the net, I suspect that we do, in fact have to pay income tax- can anyone tell me who is right please?
Thanks!

mikewebs

I would think you do have to pay income tax on the rent you receive - you receive rent INCOME from it. You can offset any repairs (excluding existing conditions when you acquired the property), maintenance and managment fees against the rental income which should reduce you liability a bit. You should contact HMRC for advice or look at www.hmrc.gov.uk

CLAPTON

I dont understand what you mean that the mortage is in your OH name but the house is owner by your OH father. Usually a mortgage company will only give a mortgage to the owner or at least the joint owner.


As far as rental income is concerned, income tax is payable on rental income... but you can offset costs like the interest on the mortgage (not the capital repayment element), maintenance and letting costs etc.

dunstonh

H's dad has said that we don't need to pay income tax on the rent we gain from the house as it isn't a second property.

He is wrong. The house you live in is your primary residence whether you own it or not. Any other property is classed as business/investment and subject to income tax and capital gains tax.

As Clapton says, the scenario doesnt sound right as the lender would want house ownership and borrowing to be in the same names.