financial implications of paying rent/sharing living costs with elderly parent

lucypilates

Hope this is the right section to post this ...

I've just bought a house with a 1 bed annexe (attached) with the plan to live together with my mum who is late 70s. She's 100%  independent at the moment though there are signs that she might need more support for daily living within a few years. Already she needs me to help with her shopping and help her make decisions and she doesn't like to use the phone etc.

She has a great pension and has almost double my income at the moment.

When we're living together, she's desperate for me to not work full-time and to be honest, I think I would need to be around a bit more to help her and be there for her too. I actually don't relish the idea of becoming too much a carer though so it will probably be a mixture of me and bought in help as needs change in the future.

My mum hasn't contributed to the buying of the house at all and is not named in the deeds. This house is definitely going to cost more to run that my old house. She will sell her own house and sit on the money.

So I was thinking that I would charge her a small rent and we'd go halves with the utility bills and council tax. She likes to be in charge of her own food (doesn't like my cooking!! lol) so she will pay for her own shopping as she does now.

What should I take into consideration in terms of financial implications? Should I be declaring the rent/share of bills to anyone?

Many thanks

Mojisola

Isn't it the same as having an adult child still living at home - they pay 'keep' towards all the bills.  It's not counted as income for the parents.

lucypilates

Mojisola said:

Isn't it the same as having an adult child still living at home - they pay 'keep' towards all the bills.  It's not counted as income for the parents.

That's how I view it ... but i realise that the tax man may have a different opinion ... just wanted to check

maman

Another way of looking at it is like people who rent out a room/annexe to help them out financially. There are sometimes tax implications in those cases above a certain figure. Not sure if it applies to family though where you're plan is to help her in the longer term. I'm a bit vague about this but I'm sure someone more knowledgeable will be along soon. 

ZeroSum

Pretty sure you can rent rooms tax free upto a certain amount.

And I cant see how making a contribution towards the utilities could be taxable, as it's not income

Keep_pedalling

You say she has a very good pension, does her income outstrip her expenditure? If so you could look at her making gifts of her excess income, which would also be good tax planning on her part. So for example her net monthly pension and other income = £2500, her monthly expenditure ( including her share of CT and utility bills) is £1500, she could then gift you £1000 a month from her excess income.

 

elsien

Is the annexe self contained, or just a bedroom/en-suite? 

Also not what you’re asking but has she made power of attorney for both finances and health/ welfare? 

[Deleted User]

Keep_pedalling said:

You say she has a very good pension, does her income outstrip her expenditure? If so you could look at her making gifts of her excess income, which would also be good tax planning on her part. So for example her net monthly pension and other income = £2500, her monthly expenditure ( including her share of CT and utility bills) is £1500, she could then gift you £1000 a month from her excess income.

 

Yes, mother gifts money in exchange for being able to live in the annexe just like my employer gifts me money to do work. Saves us both a lot of money in income tax and national insurance.

[Deleted User]

ZeroSum said:

Pretty sure you can rent rooms tax free upto a certain amount.

And I cant see how making a contribution towards the utilities could be taxable, as it's not income

The Rent-a-Room Scheme allows owner occupiers and tenants to receive tax-free rental income if they provide furnished accommodation in their only or main home. In the OP's case it very much depends on whether this annexe is a room in the OP's main home or if it is a self-contained annexe separate from the main home.

[Deleted User]

Mojisola said:

Isn't it the same as having an adult child still living at home - they pay 'keep' towards all the bills.  It's not counted as income for the parents.

It's not actually true that rent from an adult child is not taxable income and it's not the view HMRC takes. In practice though no tax is usually payable because the amount of rent charged by a parent is under the RAR allowance or if the parent were to use rent minus expenses instead of RAR the tax due would be zero as most parents only charge their offspring a bit of rent to cover expenses making the profit zero.

[Deleted User]

lucypilates said:

Mojisola said:

Isn't it the same as having an adult child still living at home - they pay 'keep' towards all the bills.  It's not counted as income for the parents.

That's how I view it ... but i realise that the tax man may have a different opinion ... just wanted to check

As above, Hector does view it differently. Is this a completely self contained annexe? Does it have it's own CT banding which if it is self contained it probably should.