Is tax payable - rent from live in family

lolly111392

Hi

I've done a lot of searching on Google but can't find an exact answer to our situation.
Me and my brother are planning on buying a house of which I will own 60% and he will have 40%. My mum will be moving in with me and my brother owns another house he lives in with his wife.
He wants my mum to pay him 'rent' of £300 a month - £240 to cover his 40% of mortgage payment liability and £60 to recoup his savings since we are using his savings as a deposit.
From what I can tell this would be classed as rental income therefore needing mortgage permission, landlord insurance and gas safety checks ect.
However - if he declares this as rental income since we own the house jointly do I therefore have to declare it?
Is there a way this wouldn't be classed as rental income so as to avoid the mortgage issues and the checks. I will be getting a consent to let on my current property so as to rent it and from what I've read it's unlikely we'd get a second consent to let for the new property? e.g if she paid the rent via me since I'm the one living in the property with her?

zagubov

I don't think your mum can be anything as formal as a lodger or a tenant (it would be like a contrived tenancy which would smell of attempted/potential benefit fraud).

It's common for families to have people staying with them in domestic arrangements. The money they'd pay would be for their "keep" rather than rental.

Problem is, I'm not sure she's got any security as she's just a houseguest.

The lender (and insurer) may be unhappy about the arrangement, if they learn about it.

Hopefully other posters can clarify if this is feasible.

00ec25

you and mother are simply a single household sharing your costs of living there

your brother's position is however totally different since it is not his home and his share of the income is indeed taxable income for him alone since that money is very clearly increasing his personal net wealth by paying off his mortgage without him having to pay the mortgage himself. Obviously therefore that is rent for him, but it isn't for you.

Money from mother to you is simply shared household costs although technically if mother is giving you money which you use to pay the mortgage with then mother is acquiring a financial claim on the property. However, that can be totally ignored since that technicality relates more to a couple living together who are likely to split un-amicably with the ousted "partner" then launching a claim for a share of the property they have part paid for - doubt your mother would do that to you!!!

unholyangel

00ec25 wrote: »

Money from mother to you is simply shared household costs although technically if mother is giving you money which you use to pay the mortgage with then mother is acquiring a financial claim on the property. However, that can be totally ignored since that technicality relates more to a couple living together who are likely to split un-amicably with the ousted "partner" then launching a claim for a share of the property they have part paid for - doubt your mother would do that to you!!!

The part in bold is a common misconception on these forums. Paying (even a partner) a sum of money as rent doesn't automatically mean they're gaining a beneficial interest. But its wise to have a written agreement so that if relations do break down, the other party can't change their mind on what was agreed and claim they were gaining a beneficial interest.

Caz3121

where does your mother live currently? how would she be funding the 'rent' payment?

00ec25

unholyangel wrote: »

The part in bold is a common misconception on these forums. Paying (even a partner) a sum of money as rent doesn't automatically mean they're gaining a beneficial interest. But its wise to have a written agreement so that if relations do break down, the other party can't change their mind on what was agreed and claim they were gaining a beneficial interest.

you have expanded on what I said, does not make what I wrote wrong as a warning, merely there was no need to go off on a tangent with detailed explanation

however, since you ask:
https://www.theguardian.com/money/2018/apr/30/my-partner-wants-me-to-pay-him-rent-equity-house

lolly111392

She currently lives in rented accommodation, she has a job which pays for her rent and claims working tax credits.
My brother is aware that should she be unable to pay due to a loss of job that she can't claim housing benefit and therefore he has to contribute to the mortgage at that point.
I won't be receiving money from her only 50% of bills which I would have go straight into the bill account.

lolly111392

If he's declaring it as income does that mean he's subject to all the usual landlord rules I.e the safety checks and landlord insurance.
Alternatively can my mum pay into our account her 'keep' and then I send my brother £100 each month as a repayment for him putting the deposit down?

xylophone

my brother owns another house he lives in with his wife.

I will be getting a consent to let on my current property so as to rent it

You and your brother are aware of the SDLT position if you buy a second property?

Is there any reason why your mother couldn't move in with you in your existing property?

Or if it is unsuitable, why you shouldn't sell it and buy something suitable?

lolly111392

Yes we are aware of the stamp duty
My house isn't suitable for her and after looking into selling and moving us on my own I can't get a new mortgage alone due to having to put nursery fees as a commited expense. This drastically lowers what they are willing to lend.

xylophone

I can't get a new mortgage alone due to having to put nursery fees as a commited expense.

But you are able to borrow more to finance the purchase of a buy to let with your brother?

Your mother has an earned income - is there any reason why you and she should not buy a suitable home together after selling your existing property?

If you go ahead with the plan to buy with your brother and keep and rent out your existing property, you would be taking on a landlord's responsibility and needing to deal with the tax on rental income?