Rent a room scheme

rizel23

Dear all,

I do not own a property yet, and I’m currently provided a accondation with my job under a license to occupy agreement.

For family reasons I’m looking at possibly remortgaging a family home that has been left in a will at around a 25% share, so a 75% LTV residential mortgage to return renting equity to other parties.

I would possibly allow a family member (brother) to continue living in this property FOC and let out two rooms.

Can anyone advise if this is possible?

Also when I move jobs I would likely need to purchase a further home (so second home technically) would a lender consider the income from the remortgaged property above from the room rents?

The property has been left in a will and my share is roughly 25% so as I understand ias long as the second home is purchased within three years I would not be liable for the additional second home stamp duty?

Thanks

Mojisola

rizel23 wrote: »

I would possibly allow a family member (brother) to continue living in this property FOC and let out two rooms.

You need to be resident in the property to use the RAR scheme.

rizel23

Thanks.

If not I presume you pay the full tax on the income?

As I don’t technically own another property currently I could well declare as my primary residence if required.

BelowTheLine

[STRIKE]Generally speaking, if you own or part own a property worth £40,000 or more, you will have to pay the higher rates on your new purchase.

If you sell the previous property within 3 years of buying your new home, you can apply for a refund of the higher rate part of your stamp duty bill.

From what you have said, unless the family home has a value of less than £40k, it looks like you will be liable for the 3% surcharge in stamp duty if/when you purchase a new home.[/STRIKE]

Thanks for the correction Lover of Lycra.

[Deleted User]

rizel23 wrote: »

Thanks.

If not I presume you pay the full tax on the income?

As I don’t technically own another property currently I could well declare as my primary residence if required.

No you cannot. To declare a property as your primary residence it has to be, at the very least, somewhere you reside. You will not live in this property so it will not be a residence never mind your primary residence. If you rent this property out you will not be able to use the rent a room scheme, and you will have tenants, not excluded occupiers, living in the property and will therefore have to comply with all the necessary legislation and the relevant taxes.

[Deleted User]

rizel23 wrote: »

Dear all,

I do not own a property yet, and I’m currently provided a accondation with my job under a license to occupy agreement.

For family reasons I’m looking at possibly remortgaging a family home that has been left in a will at around a 25% share, so a 75% LTV residential mortgage to return renting equity to other parties.

I would possibly allow a family member (brother) to continue living in this property FOC and let out two rooms.

Can anyone advise if this is possible?

Also when I move jobs I would likely need to purchase a further home (so second home technically) would a lender consider the income from the remortgaged property above from the room rents?

The property has been left in a will and my share is roughly 25% so as I understand ias long as the second home is purchased within three years I would not be liable for the additional second home stamp duty?

Thanks

That is incorrect. The higher rate of SDLT for the purchase of additional residential properties will apply when you purchase an additional residential property.

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09730

[Deleted User]

BelowTheLine wrote: »

Generally speaking, if you own or part own a property worth £40,000 or more, you will have to pay the higher rates on your new purchase.

If you sell the previous property within 3 years of buying your new home, you can apply for a refund of the higher rate part of your stamp duty bill.

From what you have said, unless the family home has a value of less than £40k, it looks like you will be liable for the 3% surcharge in stamp duty if/when you purchase a new home.

That is not correct. When replacing your main residence you have 3 years to sell your previous main residence to be eligible for a refund. The property the OP wants to buy is not his main residence and therefore he will not be eligible for a refund.

The OP is also going to spunk his FTB SDLT relief purchasing a property that will not be his main residence.

rizel23

Would you mind sharing the source for this?

My understanding is the share needs to be 50% or less on the inherited property, which it currently is and additional home purchased within three years of this inherited share to be except of the additional 3%?

https://www.stampdutycalculator.org.uk/stamp-duty-second-homes.htm

[Deleted User]

rizel23 wrote: »

Would you mind sharing the source for this?

My understanding is the share needs to be 50% or less on the inherited property, which it currently is and additional home purchased within three years of this inherited share to be except of the additional 3%?

https://www.stampdutycalculator.org.uk/stamp-duty-second-homes.htm

I did. I posted the link to the HMRC manual. You're not just inheriting a share of a property, you're raising a mortgage to buy the other beneficiaries out of a property that is not and will never be your residence.

muhandis

Unscrupulous landlords (not saying that you are one) do employ all sorts of trickery to label their tenants as lodgers. Also sometimes dodging HMO rules in the process.

The modus operandi (say for a 4 bed house) is that they have all their official correspondence directed to the house, pay council tax and bills, leave one room locked which contains personal possessions, leave personal possessions around the house and then rent out the remaining rooms under lodger "licenses" as opposed to the tenants that they are. They then abuse the lack of protection in the license to keep the deposit when the lodger leaves. Rinse and repeat using transient renters who are unlikely to know the law.

The landlord of course, has some place else to stay. I doubt they declare or pay taxes on the income either.

My cousin who was in Huddersfield as an overseas student got caught up in such a scam. I helped to take the landlord to small claims but we couldn't prove that he wasn't resident unfortunately. I grassed him to HMRC (assuming he doesn't declare the income) but don't know if that went anywhere or not.

Just to be clear, I'm not saying that you are contemplating any such thing, just that you need to be actually resident to have lodgers as opposed to tenants.

rizel23 wrote: »

As I don’t technically own another property currently I could well declare as my primary residence if required.

BelowTheLine

All too common unfortunately.

muhandis wrote: »

Unscrupulous landlords (not saying that you are one) do employ all sorts of trickery to label their tenants as lodgers. Also sometimes dodging HMO rules in the process.