Advice for renting out a flat we have just inherited please

cheekyemma

Hello,

My husband has just inherited a 2 bed flat which is has been rented out with a tenancy company for years. We would like to continue with this and take over the rental but I have a query about the tax and income side of things.  Hopefully it will be straightforward? 

My husband works full time and we are housed in a property connected to his job. We pay rent straight from his wages. I am disabled and had to give up work last year due to my MS. We were hoping that I could manage the rental and use the rental income as my own income and pay tax from my allowance. Is this allowed? I currently have no income and we have done the marriage allowance tax share so that we can maximise my husbands allowance. Does anyone have any knowledge of what is and isn't allowed please? I have looked on HMRC and realise that I would have to self assess which is fine but my husband is worried that it should all come from his tax allowance (as the flat is in his name) but it would push him into a higher bracket which is silly for him to do as I am not earning anything. I hope that makes sense and obviously we want to do it all right and not have a big tax bill at the end of it as we just make ends meet now.

Thank you

Stubod

If it is in your name only, then you have a basic tax allowance of £12,570, (a bit less if you have given some of your allowance to your husband), so if your "total" income (including rental income) is less than this, then you would not pay tax. 

NBYou can also "deduct" £1,000 (Landlords allowance) from your rental income for tax purposes, plus any other items of "expenditure" for the maintenance of the property, (check the Gov. website to see which items are tax deductable).

...and are you sure you want to be a Landlord???.....probably OK if your rental income to value is fairly good, and the tenant is a "known entity" with a good track record.....but if not, I would always recommend selling and investing as a less stresseful way of making money, but only you can know your risk tolerance, and each to their own...

tacpot12

The answer on this HMRC Community Forum thread will help: Assigning rental income to my husband - Community Forum - GOV.UK

Stubod isn't quite right about the ability to claim the Landlord's Expense Allowance AND the expenses you incur. It's case of claiming the Landlord's Expense Allowance OR the expenses you incur. 

You will be lucky if you can keep your expenses to less than £1,000 a year, so most of the time you will claim the expenses you have incurred in your self-assessment. Stubod is right that if you have no other income, you might not have to complete a Self-Assessment tax return - it will depend on the amount of income the flat is generating.

The Self-Assessment property income form is fairly straightforward if you do need to complete. I collect all the data I will need onto a spreadsheet before filling in my Self-Assessment. That way, I can keep all the previous years figures in the same spreadsheet (I have each year on a separate tab/worksheet) and refer back to them to check that the figures make sense. 

Unless the tenacy company is doing your accounting for you, you are likely to need to keep accounting records of your income and expenses. You also need to keep copies of invoices/receipts. I keep these electronically, e.g. by taking photos of receipts. 

You and your husband need to read up on all the landlord obligations. Have a read of my post here: 1st time letting house. Help needed. Plz — MoneySavingExpert Forum

FreeBear

cheekyemma said: I am disabled and had to give up work last year due to my MS.

If you are in receipt of benefits, any rental income could affect the benefits you currently get. Weigh up the pros & cons carefully before making a decision.

PRAISETHESUN

Make sure you read up and understand all the obligations that come with being a LL - there are plenty of things you need to be aware of and the consequences can be expensive if you get it wrong. Might be easier to simply sell the property and invest the money elsewhere.

My understanding for the tax is that if your husband is the owner, then he is responsible for the tax. I don't think he can just assign the rental income to you without also changing the underlying ownership of the property?

Teapot55

It’s good practice to file any paper receipts connected with expenditure on the let property on the day you get them so they don’t get lost or mislaid. Sometimes they can also be handy to refer to at a later date. 

It’s less common now that so much is electronic but you don’t want to have missing proof or just plain forget an item that you could claim against tax. 

I use one of those box files with the spring clip. No hole punches or plastic folders needed. 

Neil49

From what you have said, the property is solely in your husbands name, in which case he should be the one to declare the income and pay the tax due.

You can't take on the tax liability for yourself as you don't own the property. 

sheramber

As. The flat is in your husband’s name only the rental is all his taxable income . 

For you to receive rental income the house needs to be owned jointly as tenants in common, splitting the ownership in your favour as you decide
 eg 90 /10 . You would receive 90% of rental income and he would receive 10%. 

HMRC will treat the income as 50/50regardless so you need to complete a form 17 declaring your beneficial interest  as per the ownership split. 

You’ll also need to provide evidence that your beneficial interests in the property are unequal, for example a declaration or deed.

https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

saajan_12

cheekyemma said:

Hello,

My husband has just inherited a 2 bed flat which is has been rented out with a tenancy company for years. We would like to continue with this and take over the rental but I have a query about the tax and income side of things.  Hopefully it will be straightforward? 

My husband works full time and we are housed in a property connected to his job. We pay rent straight from his wages. I am disabled and had to give up work last year due to my MS. We were hoping that I could manage the rental and use the rental income as my own income and pay tax from my allowance. Is this allowed? I currently have no income and we have done the marriage allowance tax share so that we can maximise my husbands allowance. Does anyone have any knowledge of what is and isn't allowed please? I have looked on HMRC and realise that I would have to self assess which is fine but my husband is worried that it should all come from his tax allowance (as the flat is in his name) but it would push him into a higher bracket which is silly for him to do as I am not earning anything. I hope that makes sense and obviously we want to do it all right and not have a big tax bill at the end of it as we just make ends meet now.

Thank you

Can husband transfer the property to you, either fully or partly? Presumably in a divorce scenario it woudl be all marital property so doesn't matter. 

That way its clean and any capital gain etc can also be based on your allowances. 

Exodi

I'm not sure I'd rush into being a landlord, we hear enough horror stories here of people that don't fully understanding their responsibilities mistaken it for an easy way to make money, later being successfully sued for not protecting the deposit within the prescribed period or something silly.

While we don't know the value of the flat, if we assume £200k as an example, held in a fixed rate bond at 4.6% pays £9,200 a year, which would ordinarily be taxed, but for you would all fall within your personal allowance (even considering the fact you've transferred part of your allowance to your husband).

I'd consider making a contribution of £2880 to a pension for you and claiming tax relief, and then maxing out your annual ISA allowances for you and your husband. Personally I would invest the money, but the more risk averse may hold this in cash ISA's instead.

But I guess it depends, if you're achieving a far higher rate of return from rent than the above, I can see the temptation to become an 'accidental landlord'. I've just watched too many episodes of 'Nightmare Tenants, Slum Landlords'!

cheekyemma

Thanks all, this has given me food for thought. We have never been in a position to own a property or get a mortgage or anything,  this has kind of fallen in our lap and we just don't know what's the best thing to do! We were kind of thinking that if anything happened to hubby's job we would have somewhere to live, hence the reason to continue to rent it out but now I'm not so sure!