Rent-a-Room question

km1500

you do not need a rent a room - you partner can give you money (tax free) towards eg food, heating, water, cleaning - basically everyday living costs

Whilst they can also give you more to help with eg the mortgage, house insurance, house repairs and improvements etc this means they could claim a financial interest in the house and thus claim part of it.

MobileSaver

jimbo_89 said:

MobileSaver said:

jimbo_89 said:

zagubov said:

You may be misunderstanding the different ways people can share accommodation with homeowners. A friend (or more likely a stranger) can be a lodger. If they pay up to the threshold but not a penny more, I'm not sure you even have to tell HMRC.

If you formally accept money from them at a rate much higher than their bills would require then that might be interpretable as assisting with mortgage payments.

My main question was about whether I could use the Rent a Room scheme and the tax allowance it offers for my case. It is now obvious to me this is not so straightforward as the RaR applies to lodgers.

Your partner will be paying half the bills so it's nothing to do with Rent a Room or tax allowances; it's not income for you, it's your partner paying their share of everyday bills (excluding any mortgage) so there's no tax implications whatsoever.

If things go pear-shaped in the future then what matters are the facts of who paid what; if your partner is contributing to the mortgage or home improvements on top of half the everyday bills like food, electric, heating etc. then they may well be able to make a claim against the property even if you have written agreements in place.

I don't mind if you want to call it rent, additional contribution or whatever. There surely must be some sort of legal mechanism to ensure they cannot claim equity on the property in the future.

That's the thing, it doesn't matter what you call it, you are asking your partner to help you pay the mortgage but don't want your partner to benefit from the appreciating asset in the same way that you will.

Obviously that is patently unfair and so while you can have written agreements and these may be persuasive if things go pear-shaped, conversely a court may decide your partner is entitled to something anyway depending on the relevant amounts and for how long they've been paying.

Perhaps more importantly, while a new partner may accept such an arrangement in the short term, as time goes by and the unusual and one-sided agreement becomes known to their friends, family and acquaintances it will almost certainly cause relationship problems but this isn't the Relationship Forum so we'll leave that there.

If you are adamant that your partner must pay more than half the everyday bills then the extra amount will be classed as income and will be taxable because as you've realised the Rent-a-Room tax allowance doesn't apply unless the person paying rent has their own room.

jimbo_89

sourpuss2021 said:

There was a fascinating thread recently written from the woman’s perspective in a situation like this, years down the line. 

 Her partner’s refusal to marry and determination to make sure she had no claim on his property (aka their home), quite understandably led to deep unease on her behalf, and eventually to the end of their relationship.

If that’s the future you want, more power to you!

But otherwise why are you moving in with this person who either you don’t love or trust?

Refer to my answer to _Penny_Dreadful - modern society has messed everything up. better safe than sorry. plus I never remember asking one of my previous landloards a share of their flat.

_Penny_Dreadful

jimbo_89 said:

sourpuss2021 said:

There was a fascinating thread recently written from the woman’s perspective in a situation like this, years down the line. 

 Her partner’s refusal to marry and determination to make sure she had no claim on his property (aka their home), quite understandably led to deep unease on her behalf, and eventually to the end of their relationship.

If that’s the future you want, more power to you!

But otherwise why are you moving in with this person who either you don’t love or trust?

Refer to my answer to _Penny_Dreadful - modern society has messed everything up. better safe than sorry. plus I never remember asking one of my previous landloards a share of their flat.

You’re comparing apples to oranges. Renting a flat with an AST is nothing like being somebody’s bidey-in. Modern society hasn’t messed anything up it’s your desire to have your cake and eat it that will lead to your downfall. 

jimbo_89

_Penny_Dreadful said:

jimbo_89 said:

MobileSaver said:

jimbo_89 said:

zagubov said:

You may be misunderstanding the different ways people can share accommodation with homeowners. A friend (or more likely a stranger) can be a lodger. If they pay up to the threshold but not a penny more, I'm not sure you even have to tell HMRC.

If you formally accept money from them at a rate much higher than their bills would require then that might be interpretable as assisting with mortgage payments.

My main question was about whether I could use the Rent a Room scheme and the tax allowance it offers for my case. It is now obvious to me this is not so straightforward as the RaR applies to lodgers.

Your partner will be paying half the bills so it's nothing to do with Rent a Room or tax allowances; it's not income for you, it's your partner paying their share of everyday bills (excluding any mortgage) so there's no tax implications whatsoever.

If things go pear-shaped in the future then what matters are the facts of who paid what; if your partner is contributing to the mortgage or home improvements on top of half the everyday bills like food, electric, heating etc. then they may well be able to make a claim against the property even if you have written agreements in place.

I don't mind if you want to call it rent, additional contribution or whatever. There surely must be some sort of legal mechanism to ensure they cannot claim equity on the property in the future. Or at least I hope there is... cohabitation agreement, deed of trust or something else that canmake everything clear.

What percentage of the rent/ contribution would be taxable is a separate story but probably linked to the above.  

Why shouldn’t a partner be able to claim equity if they’ve helped repay your mortgage? 

I am not planning to answer all similar questions (and I am sure there will be many) but there are quite a few different perspectives to look at this.

And why should they? They would be paying off another landlord's mortgage regardless. As I myself have done for more than 8 years... I have been with my partner for quite some time now and if it all goes well in the next couple of years, hopefully then there is marriage, family, etc. I am not planning to take advantage of anyone.

jimbo_89

MobileSaver said:

jimbo_89 said:

MobileSaver said:

jimbo_89 said:

zagubov said:

You may be misunderstanding the different ways people can share accommodation with homeowners. A friend (or more likely a stranger) can be a lodger. If they pay up to the threshold but not a penny more, I'm not sure you even have to tell HMRC.

If you formally accept money from them at a rate much higher than their bills would require then that might be interpretable as assisting with mortgage payments.

My main question was about whether I could use the Rent a Room scheme and the tax allowance it offers for my case. It is now obvious to me this is not so straightforward as the RaR applies to lodgers.

Your partner will be paying half the bills so it's nothing to do with Rent a Room or tax allowances; it's not income for you, it's your partner paying their share of everyday bills (excluding any mortgage) so there's no tax implications whatsoever.

If things go pear-shaped in the future then what matters are the facts of who paid what; if your partner is contributing to the mortgage or home improvements on top of half the everyday bills like food, electric, heating etc. then they may well be able to make a claim against the property even if you have written agreements in place.

I don't mind if you want to call it rent, additional contribution or whatever. There surely must be some sort of legal mechanism to ensure they cannot claim equity on the property in the future.

That's the thing, it doesn't matter what you call it, you are asking your partner to help you pay the mortgage but don't want your partner to benefit from the appreciating asset in the same way that you will.

Obviously that is patently unfair and so while you can have written agreements and these may be persuasive if things go pear-shaped, conversely a court may decide your partner is entitled to something anyway depending on the relevant amounts and for how long they've been paying.

Perhaps more importantly, while a new partner may accept such an arrangement in the short term, as time goes by and the unusual and one-sided agreement becomes known to their friends, family and acquaintances it will almost certainly cause relationship problems but this isn't the Relationship Forum so we'll leave that there.

If you are adamant that your partner must pay more than half the everyday bills then the extra amount will be classed as income and will be taxable because as you've realised the Rent-a-Room tax allowance doesn't apply unless the person paying rent has their own room.

Many thanks for the response.

A couple of things:
- There is nothing obstructing my partner from enjoying the full extent of the property. The Rent a Room suggestion (clarified - not applicable) was just to see where we are with tax implications as I can demonstrate there are more than one rooms.
- Not a new partner.
- Relationship problems may indeed come up will be between me and my partner to discuss of course (and hopefully solve).
- If additional income needs to be taxed, then so be it. HMRC's joy it is!

jimbo_89

Thank you all for any useful comments on the topic, it was very useful for me! I will not be posting any other comments as I think we covered most of the different on-topic parameters.

_Penny_Dreadful

To be fair @jimbo_89 this topic has been discussed ad nauseam on the forum. A quick search for similar threads would have told you that. 

diystarter7

jimbo_89 said:

Thank you all for any useful comments on the topic, it was very useful for me! I will not be posting any other comments as I think we covered most of the different on-topic parameters.

Thank you
Very interesting thread and helpful too.

thanks

MobileSaver

jimbo_89 said:

MobileSaver said:

jimbo_89 said:

MobileSaver said:

jimbo_89 said:

zagubov said:

You may be misunderstanding the different ways people can share accommodation with homeowners. A friend (or more likely a stranger) can be a lodger. If they pay up to the threshold but not a penny more, I'm not sure you even have to tell HMRC.

If you formally accept money from them at a rate much higher than their bills would require then that might be interpretable as assisting with mortgage payments.

My main question was about whether I could use the Rent a Room scheme and the tax allowance it offers for my case. It is now obvious to me this is not so straightforward as the RaR applies to lodgers.

Your partner will be paying half the bills so it's nothing to do with Rent a Room or tax allowances; it's not income for you, it's your partner paying their share of everyday bills (excluding any mortgage) so there's no tax implications whatsoever.

If things go pear-shaped in the future then what matters are the facts of who paid what; if your partner is contributing to the mortgage or home improvements on top of half the everyday bills like food, electric, heating etc. then they may well be able to make a claim against the property even if you have written agreements in place.

I don't mind if you want to call it rent, additional contribution or whatever. There surely must be some sort of legal mechanism to ensure they cannot claim equity on the property in the future.

That's the thing, it doesn't matter what you call it, you are asking your partner to help you pay the mortgage but don't want your partner to benefit from the appreciating asset in the same way that you will.

Obviously that is patently unfair and so while you can have written agreements and these may be persuasive if things go pear-shaped, conversely a court may decide your partner is entitled to something anyway depending on the relevant amounts and for how long they've been paying.

Perhaps more importantly, while a new partner may accept such an arrangement in the short term, as time goes by and the unusual and one-sided agreement becomes known to their friends, family and acquaintances it will almost certainly cause relationship problems but this isn't the Relationship Forum so we'll leave that there.

If you are adamant that your partner must pay more than half the everyday bills then the extra amount will be classed as income and will be taxable because as you've realised the Rent-a-Room tax allowance doesn't apply unless the person paying rent has their own room.

- If additional income needs to be taxed, then so be it. HMRC's joy it is!

@_Penny_Dreadful is of course correct that you can't have your cake and eat it but ironically in this instance it works in your favour.

Because you are categorically not accepting any contribution to the mortgage (which would otherwise have been tax-free) you will be declaring the income to HMRC and will have to pay tax on it... but in your case that's not so bad as it means that if things go sour several years down the road then you will have pretty compelling evidence that the payments were actual rent and not mortgage contributions.