If you rent your house to a couple of family members i.e your sons and they pay you a rental income each month approx £1100 a month is this classed as income?? Would you need to complete a SA?
I can't see any reason why this wouldn't be treated any differently from a normal arms length transaction so I would say yes to both it being treated as rental income and also to submitting a tax return.
no question about it. Your renting it out therefore receiving an income from it. It doesn't matter who the person is your renting to. Therefore an SA tax return is required. They would also need to have all the legal requirements in place that they would to any other tenant ie PAT testing, smoke alarms, correct house insurance etc.
and don't forget to add to that list that if the property is on a mortgage that is not a buy to let type mortgage one needs to ensure that the mortgage company agree to the arrangement for which they're going to want to see a written tennancy agreement.
Tax implications of this include being able to claim the interest apportionment of a mortgage on an investment property (should really be a buy to let mortgage for that) but also there is the issue that when they come to sell the property the procedes may not all be tax free (dependant upon how long the property is rented out for).
You need to be able to advise your clients on the potential current and future tax implications of their actions.
kind regards,
Shaun,
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi Shaun, I agree that there are possible implications with the mortgage company of letting a property that they have not agreed is to be let but I'm not so sure (but equally not completely sure now!) that this impacts on the ability to claim tax relief against the profits of the let. I'm fairly sure hmrc would have no problem with that, indeed I have always thought you can extend the mortgage on your own home in order to finance the purchase of an investment property and claim the interest on the re-mortgage part.
Agree about the potential cgt liability though on selling an investment property. Normal rules are that if you have lived there for a reasonable time prior to letting it then you get those years plus the last 3 years of ownership counting as your ppr.
