A landlord on UC

Foxy222

Hi ive been a lurker, this is my first post.
Ill try to be as brief but concise as possible.  
Ive been on income support then switched myself over to UC for about 7 years i was in the support group on IS.
Im a single mum, by that I mean I get no maintenance from the dad. 
Me and child lived with my mum. My mum passed away very suddenly in 2023. I was devastated.  The house i live in is now in just my name. There was no change to report. 
Less than a month later my dad died. I was left his house. He had expressed to me during one of his morbid talks he'd like my child to one day have his property. 
His house was in some state. He didn't have a big pot of money about £3k which was sucked up by the repairs on no time. 
After the crushing grief ive slowly been sorting the house myself, with help of friends. 
I want to rent the property creating an income for myself. It should rent for £1200 a month, minus all the fees ill get £900 ish. 
 Not enough for myself and child. Will I be able to get UC top up or do I just stop it altogether. Does the house count as a disregarded asset as its providing my income? 
 Its really worrying me. 

peteuk

Under normal circumstance, if you do not live in a house you own then it is classed as capital.  In this instance I believe there is no mortgage on either property.  If the house was unfit to inhabit or you were looking at selling it then it would have been disregarded.

Now comes the issue, you've owed two properties since 2023, at which point you should have declared this as such.  (It’s not 100% clear in the info you've provided) so therefore if the capital is over £16K your entitlement to UC would have stopped.  If this is the case you will be faced with a potential back payment of approx two years UC.

Because of this if you now rent the second property, any potential disregard is mute, IMHO.


EDIT noted your other post suggests you in inherited over £100K from your mums pension pot and were looking to buy a house abroad.  

NedS

Your house your dad left you is considered capital, and you must declare it. Assuming the value is more than £16,000, your claim for UC will end.

You can either rent the property to provide an income to support yourself or sell it and live off the capital, or invest it some other way to provide an income. You should research thoroughly before considering becoming a landlord.

Muttleythefrog

When you inherited £125k (according to previous posting - was this not you?) your UC claim should have ended unless it falls to be disregarded due to its nature and having not been spent - if you did buy a holiday home abroad with the money then obviously that should be declared capital. Anyway when very soon after you inherited the property which you do not live in it sounds like its value was also going to be over £16k so unless it fell to be disregarded for some reason then your UC would also end for this reason.

The rental issue then becomes redundant... it'll have no impact on UC or means tested benefits as you are likely entitled to none. I strongly recommend you get your affairs in order unless I have misunderstood completely the posts I've read. Pay back what you owe before they come for you - looking down on Great Western beach is far better than looking up at Northernhay Gardens if you know what I mean! Please correct any misunderstanding.

kaMelo

If I've read correctly, the inheritance was mums pension pot which, as long as the OP hasn't accessed, would be disregarded as it is a pension pot.

p00hsticks

kaMelo said:

If I've read correctly, the inheritance was mums pension pot which, as long as the OP hasn't accessed, would be disregarded as it is a pension pot.

I don't think you have read correctly - the inheritance is her fathers property - no mention of a pension pot that I can see (at least not in this thread). The OP is living in a separate property that her now deceased mother also lived in with her and her son and is owned by the OP.  

sheramber

p00hsticks said:

kaMelo said:

If I've read correctly, the inheritance was mums pension pot which, as long as the OP hasn't accessed, would be disregarded as it is a pension pot.

I don't think you have read correctly - the inheritance is her fathers property - no mention of a pension pot that I can see (at least not in this thread). The OP is living in a separate property that her now deceased mother also lived in with her and her son and is owned by the OP.  

previous post

https://forums.moneysavingexpert.com/discussion/6512898/buying-a-holiday-home-abroad/p1

kaMelo

p00hsticks said:

kaMelo said:

If I've read correctly, the inheritance was mums pension pot which, as long as the OP hasn't accessed, would be disregarded as it is a pension pot.

I don't think you have read correctly - the inheritance is her fathers property - no mention of a pension pot that I can see (at least not in this thread). The OP is living in a separate property that her now deceased mother also lived in with her and her son and is owned by the OP.  

The pension pot is mentioned in anther of the OP's posts. I was answering the point from @Muttleythefrog.

I didn't comment on inheriting dad's home as enough posters have already pointed out that it needed declaring after probate was granted and there is no disregard applicable to dads property unless they are actively trying to sell it.

Grumpy_chap

Muttleythefrog said:

The rental issue then becomes redundant... it'll have no impact on UC or means tested benefits 

AIUI, rental income rarely has an impact on UC - at least not directly.

If an individual has a second property, then the value of that second property is considered as capital, and the capital value above £6k has an impact on UC (by the deemed income) up until the capital value is £16k at which point the entitlement to means-tested benefits is nil.  Again, the entitlement to nil means-tested benefits results from the deemed income arising from the capital as negating the access to means-tested benefits.  It matters not whether the capital is generating more or less than the deemed income, the impact to means-tested benefits is the same.

As such, the actual income arising from the capital cannot be considered as income as that would be double-counting.  Obviously, that actual income arising from the capital might increase the capital balance, thus further reducing eligibility for means-tested benefits.

Foxy222 said:

Hi ive been a lurker, this is my first post.
Ill try to be as brief but concise as possible.  
Ive been on income support then switched myself over to UC for about 7 years i was in the support group on IS.
Im a single mum, by that I mean I get no maintenance from the dad. 
Me and child lived with my mum. My mum passed away very suddenly in 2023. I was devastated.  The house i live in is now in just my name. There was no change to report. 
Less than a month later my dad died. I was left his house. He had expressed to me during one of his morbid talks he'd like my child to one day have his property. 
His house was in some state. He didn't have a big pot of money about £3k which was sucked up by the repairs on no time. 
After the crushing grief ive slowly been sorting the house myself, with help of friends. 
I want to rent the property creating an income for myself. It should rent for £1200 a month, minus all the fees ill get £900 ish. 
 Not enough for myself and child. Will I be able to get UC top up or do I just stop it altogether. Does the house count as a disregarded asset as its providing my income? 
 Its really worrying me. 

2023 was obviously a very difficult year for you with the loss of both parents in quick succession and I sympathise for your loss, however the way I read your previous post from the previous thread linked a few posts earlier ( https://forums.moneysavingexpert.com/discussion/6512898/buying-a-holiday-home-abroad/p1 ) is that there was something to report after your Mum passed away:

Foxy222 said:

Newbie poster here.
I sadly lost my mum last year and I've inherited her pension pot ( £125k) . Initially I thought I'll leave it for my own pension. But I'm starting to feel life can be short perhaps find an enjoyable way to invest. 
I'm just toying with the idea of buying a holiday home in Spain/Portugal....somewhere easy to fly to from Newquay.  Needs to be child friendly to not crazy hours of travel( I have a 4yo) 
I'm reading a few scare stories and wondering if it's not a good investment. 
I dont know if the fact i inherited my dad's house around the same time ( it was a very sad year) makes any difference. I plan to renovate and rent that one.
I know there are obstacles but is there so many this just won't be feasible? 

I'd like the good, the bad, and the ugly!!

Thank you 

That reads to me as though you inherited your Mum's house (in which you lived anyway) and also inherited £125k from her pension pot. 
It further reads as though that £125k from Mum's pension pot is not restricted (and hence disregarded) as would be the case if that fund automatically (not optionally) transferred into a pension for your retirement.  The suggestion to just spend it on a holiday home indicates the £125k was available for your immediate use in whatever manner you saw fit.

It therefore seems as though the inheritance from your Mum should have been reported at that time.  It would have resulted in your access to mean-tested benefits ceasing.
The rules can be a bit nuanced, but there are certainly some that would suggest the inheritance should be declared even if it is then disregarded for some reason.

Having reported the inheritance from Mum and the cessation of UC, there would have been no reporting required with regard to the property inherited from Dad.

You probably require professional advice and need to retrospectively report both the inheritance from your Mum and the inheritance from your Dad.  It initially seems as though any UC paid since the first inheritance will likely need to be repaid.  A positive pro-active correction initiated by yourself is probably the way to minimise any penalties that might follow.

I am a little confused that in the beginning of this thread you state you have been claiming UC for 7 years, yet in the thread a year back about buying the holiday home there is nothing to indicate that you were claiming UC.

Newcad

Just to clarify, without getting into the OPs previous posts or current circumstances.

If the value of a second property can be disregarded, for whatever reason, and that property is rented out then any rent received is not counted as 'unearned income' for UC but is instead immediately counted as being the UC claimants 'Capital' - (which is not the same as the property value so is not disregarded).

To contrast, rental income from a 'lodger' in your own property is not listed in the UC regulations as being either 'unearned income' nor capital, so is ignored entirely by UC. (Not "Disregarded" but not mentioned in the legislation at all so irrelevant to a UC claim).

itsthelittlethings

Newcad said:

Just to clarify, without getting into the OPs previous posts or current circumstances.

If the value of a second property can be disregarded, for whatever reason, and that property is rented out then any rent received is not counted as 'unearned income' for UC but is instead immediately counted as being the UC claimants 'Capital' - (which is not the same as the property value so is not disregarded).

To contrast, rental income from a 'lodger' in your own property is not listed in the UC regulations as being either 'unearned income' nor capital, so is ignored entirely by UC. (Not "Disregarded" but not mentioned in the legislation at all so irrelevant to a UC claim).

Why would a rented out property be disregarded?