Best way to help MIL but also protect ourselves

helpingtheMIL

MIL (in her seventies) has found herself on her own and needs to sell her property.  Once it's sold she may come out of it with around £70k so obviously not enough to buy somewhere outright and won't get a mortgage.  We are trying to come up with a way to help her but also not end up in a tricky situation ourselves. 

My husband and his brother are considering buying a house using her £70k as a deposit then getting a buy-to-let mortgage on a house that's around £180k.  Basically I would like to know any advice to minimise tax situation....if we charge her the going rate for rent (i've seen that that might be something we have to do when I've researched) she can't afford it so we would only want to charge her enough to cover the mortgage plus other costs like insurance etc but then if we need to pay income tax on this we'd need to add an additional amount to cover that so we aren't left short- which again she won't be able to afford. 

If she gifts her sons the £70k then regularly gifts them some money from her pension (so then doesn't pay any rent) is that allowed?  Her estate will be well under the inheritance threshold so sounds fair to me but obviously don't want to do anything dodgy but also if we go by the letter i.e declaring rental income and paying tax on it I'm not sure we can make this doable and will have to try maybe council housing which I know may take a long time. Will obviously need to see an advisor at some stage but want to have a rough idea of things before we start shelling out money.

Any suggestions as to how we can help her within the rules would be very helpful.  

sheramber

You would have to comply with all the standard landlord’s  ‘legal  responsibilities such as landlord  insurance, certificates etc.

All rental income received must be reported to HMRC

If below market value rent is charged  expenses claim is limited to the amount of rental income received. 

Only mortgage interest ( no capital repayment) is a financial charge and is only allowable as a  deduction from the tax due ,  limited to 20%.
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HobgoblinBT

You might be best to try via a broker as some BTL products are not available where the tenant is family.

ACG

You will struggle to get a BTL mortgage. 
You cant "gift" money to purchase a property and then expect to live in it... Thats not a gift, I suppose it is but it has strings attached. More so if you do not plan on charging market rent. 

It can potentially be done, but its not as simple as just getting a BTL. Then you also have to look at income tax, CGT tax when selling, whether it would be deemed as deprivation of assets should MIL need care in the coming years. Its actually quite tricky to overcome all of the different hurdles. 

Definitely one for a good experienced broker as there is a lot to overcome. 

Keep_pedalling

Has she looked at renting? Sheltered housing may be a good option for someone of her age. 

gwynlas

Your husband and his brother could loan her the additional money to purchase a suitable home and safeguard this by putting a charge on the property.

helpingtheMIL

Keep_pedalling said:

Has she looked at renting? Sheltered housing may be a good option for someone of her age. 

She is really reluctant to rent but I agree that could be a great option! Thank you :0)

helpingtheMIL

gwynlas said:

Your husband and his brother could loan her the additional money to purchase a suitable home and safeguard this by putting a charge on the property.

Ooo hadn't thought of this option! Thank you!