Tax help - Brother and his family living with us temporarily

HappyChappy17

Hi Everyone,

Firstly thank you to all who can offer me some guidance with this, your time and contribution is most appreciated!

My situation, currently living with my Brother, Sister-in-Law and their three children alongside with my wife. They are with us temporarily until their Visa's are ready for the them to emigrate and whilst they are living with us they are helping us with our monthly outgoings (£600 for rent + £100-£180 for gas, electric & water) we also are halving the weekly food shops so would receive approximately another £70 a week from them.

This has been going on for around 5 months now and as we're not sure when they will actually be leaving I'm now starting to wonder if there could be tax implications to this scenario and this is where I require your assistance please.

I know about the Rent a Room scheme but not sure if this applies to family helping family if that makes sense? To clarify further the reason they are living with us is because they sold their house in preparation for their new life (if they didn't sell the estate agents said they might not get the same value as before).

Thanks again,

tacpot12

YOu can use the Rent a Room Scheme. There is a helpsheet here: HS223 Rent a Room Scheme (2024) - GOV.UK (www.gov.uk)

This helpsheet lists the situations when you cannot us it, and it doesn't mention renting to family, so you are ok. 

If only the rent of £600 pcm is taxable, then you can afford (at least from the tax perspective) for the situation to continue indefinitely. 12 x £600 is £7,200, which is below the annual Rent a Room threashold (although the threashold might change in future). 

This link confirms that Utility Bills are a legitimate expense when using the Rent A Room Scheme: Rent a room in your home: Rent, bills and tax - GOV.UK (www.gov.uk)

So as long as you are only charging a resonable proportion of the utility bills to cover actual usage, all the cost of this is an expense that can be set against the income you receive, so you will still be below the £7,500 threashold. 

Brie

this is neither renting so no tenancy and not the same as having a lodger.  this is family staying with you for "some time".  What they are paying to you is just enough to cover the cost of what extra you have to pay out to have them there.  So nothing to do with HMRC. 

MiL lived with us for 4+ years and just contributed a portion of our expenses, nothing reported to HMRC.

HappyChappy17

Brie said:

this is neither renting so no tenancy and not the same as having a lodger.  this is family staying with you for "some time".  What they are paying to you is just enough to cover the cost of what extra you have to pay out to have them there.  So nothing to do with HMRC. 

MiL lived with us for 4+ years and just contributed a portion of our expenses, nothing reported to HMRC.

I agree with you on parts however 'What they are paying to you is just enough to cover the cost of what extra you have to pay out to have them there' is not the case. They are contributing to bills and we halve the food cost, so the rent I would class as extra income.

AskAsk

HappyChappy17 said:

Brie said:

this is neither renting so no tenancy and not the same as having a lodger.  this is family staying with you for "some time".  What they are paying to you is just enough to cover the cost of what extra you have to pay out to have them there.  So nothing to do with HMRC. 

MiL lived with us for 4+ years and just contributed a portion of our expenses, nothing reported to HMRC.

I agree with you on parts however 'What they are paying to you is just enough to cover the cost of what extra you have to pay out to have them there' is not the case. They are contributing to bills and we halve the food cost, so the rent I would class as extra income.

It is the rent that may become taxable, but someone said earlier, as long as their share of the bills and food is not creating a profit, what you are charging is below the rent a room relief.

HappyChappy17

AskAsk said:

HappyChappy17 said:

Brie said:

this is neither renting so no tenancy and not the same as having a lodger.  this is family staying with you for "some time".  What they are paying to you is just enough to cover the cost of what extra you have to pay out to have them there.  So nothing to do with HMRC. 

MiL lived with us for 4+ years and just contributed a portion of our expenses, nothing reported to HMRC.

I agree with you on parts however 'What they are paying to you is just enough to cover the cost of what extra you have to pay out to have them there' is not the case. They are contributing to bills and we halve the food cost, so the rent I would class as extra income.

It is the rent that may become taxable, but someone said earlier, as long as their share of the bills and food is not creating a profit, what you are charging is below the rent a room relief.

Thank you. Do you think it would be wise to keep a log of this or would you say that's unnecessary?

Just wondering if I should create a spreadsheet and every month record rent received, utility bill & food cost, their share of the utility costs & food, etc? 

silvercar

HappyChappy17 said:

AskAsk said:

HappyChappy17 said:

Brie said:

this is neither renting so no tenancy and not the same as having a lodger.  this is family staying with you for "some time".  What they are paying to you is just enough to cover the cost of what extra you have to pay out to have them there.  So nothing to do with HMRC. 

MiL lived with us for 4+ years and just contributed a portion of our expenses, nothing reported to HMRC.

I agree with you on parts however 'What they are paying to you is just enough to cover the cost of what extra you have to pay out to have them there' is not the case. They are contributing to bills and we halve the food cost, so the rent I would class as extra income.

It is the rent that may become taxable, but someone said earlier, as long as their share of the bills and food is not creating a profit, what you are charging is below the rent a room relief.

Thank you. Do you think it would be wise to keep a log of this or would you say that's unnecessary?

Just wondering if I should create a spreadsheet and every month record rent received, utility bill & food cost, their share of the utility costs & food, etc? 

Many people charge their offspring “board” or “keep” without keeping detailed spreadsheets on how much they are profiting or subsidising their children.

The rules on the rent a room scheme don’t allow deductions for expenses, so better that your guests pay for groceries or some household bills and you pay them back, rather than risk being seen as an all inclusive rate.

HappyChappy17

@silvercar Thank you. I may need to keep track of what I've actually received in this case because if I receive over £7,500 from them I assume it'll have to be a self assessment? As a side note I'm aware that we can gift each other £3000 tax-free a year, £6,000 if carried over so could the food and utility income fall under that?

RAS

Food and utility income is just sharing household costs. Millions share these with their child, parent, sibling or flat mate. Do you consider your partner/spouse's contribution to household costs a taxable benefit? 

silvercar

RAS said:

Food and utility income is just sharing household costs. Millions share these with their child, parent, sibling or flat mate. Do you consider your partner/spouse's contribution to household costs a taxable benefit? 

The issue is the actual rent and keeping other costs separate as shared household costs. Ideally I would have one payment for the rent and a separate payment for the shared bills. I don’t think it’s an issue, but you don’t want to go down the road of charging X inclusive of all bills as that would breach the limit, so rent of X plus bill contribution is optically better.

AskAsk

HappyChappy17 said:

AskAsk said:

HappyChappy17 said:

Brie said:

this is neither renting so no tenancy and not the same as having a lodger.  this is family staying with you for "some time".  What they are paying to you is just enough to cover the cost of what extra you have to pay out to have them there.  So nothing to do with HMRC. 

MiL lived with us for 4+ years and just contributed a portion of our expenses, nothing reported to HMRC.

I agree with you on parts however 'What they are paying to you is just enough to cover the cost of what extra you have to pay out to have them there' is not the case. They are contributing to bills and we halve the food cost, so the rent I would class as extra income.

It is the rent that may become taxable, but someone said earlier, as long as their share of the bills and food is not creating a profit, what you are charging is below the rent a room relief.

Thank you. Do you think it would be wise to keep a log of this or would you say that's unnecessary?

Just wondering if I should create a spreadsheet and every month record rent received, utility bill & food cost, their share of the utility costs & food, etc? 

There isn't harm in keeping records.  I think you will be fine as they are family and the rent could actually be partly gift as appreciation for you putting up with them being there!