Income tax on 2nd home for parents to live in

fudgey92

I'm looking to buy a second home, not a buy to let, a standard mortgage. I pass the affordability checks and have the 25% deposit, plus stamp duty etc.

Thave two options:

1. Have the mortgage solely in my name. My parents send me money every month to cover the cost of the mortgage payments. Will this incur income tax? Or can it technically be a gift?
2. Add my mum to the mortgage, which will reduce the mortgage length down to a maximum of 14 years due to her being 61. My mum pays for mortgage direct. Would this avoid me paying income tax?

This is not my main residence. I have my own house I live in. My parents rent and I'm just trying to help them out without having to be a tonne of income tax.

Any advice please?

housebuyer143

Are you sure you are allowed to let your parents live in it on a residential mortgage in your sole name? I believe this falls under renting it as it's not your residence or even second residence and them paying you to live there is considered rent and it's taxable. 
You might need to put your mum on it to get around this.

Im sure someone will correct me if I'm wrong but I think what you suggest in option one is against the mortgage terms.

FlorayG

Option one is definitely rent and you have to pay tax on it

Mark_d

You first suggestion is effectively buy-to-let even though you'd like the mortgage to be a cheaper residential mortgage. You are buying a property for someone else to live in - and that someone else would pay you money each month.

You would also have to pay the stamp duty supplement on this second home you're buying.  You income from your parents (tenants) would also be taxable.

If the new house was a joint purchase with your mum then part of the property is a second home for yourself, so you will have to pay stamp duty supplement and CGT when you sell.  Your mum could pay the mortgage directly to avoid her payments triggering income tax for you.

Brie

Why just your mom on the mortgage?  what happens to her portion should she die before your dad?  

silvercar

I’m going to go against the trend of comments here.

Nothing wrong with buying a second home, plenty of people do it with a mortgage. (Though you could of course increase the mortgage on your main home and buy this one outright.) if you intend to let family members live in it, they will need to sign something with the lender, that they won’t stand in the way if the lender needs to repossess.

if you charge them rent and you want a mortgage on it, then it will be a regulated BTL, such mortgages are possible, but far fewer lenders offer them. In this case the rent would be income and you would have to declare it and pay tax.

 If you can afford to you could decide not to charge them rent and they may decide to be generous in other ways to you eg a greater inheritance. 

Plenty of lenders will allow a mortgage passed 75, particularly if your income is sufficient to cover the mortgage on its own, allowing for your other outgoings.

movilogo

There is no single right answer here. Many BTL mortgages prevent letting to family members.
It all depends what kind of relationship you have with your parents.
You can even avoid officially renting out to them eg cash inside envelop. 
You can live there 1 day per week (or make it look like that) and then you are living there so complying with law. 
Also, you pay tax only on rent amount minus expenses and you get 20% relief on mortgage. So if your parents pay you only the mortgage amount then you are not making much profit and tax liability will be less. If you are a basic rate tax payer, you may not have any tax liability though need to declare it.