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Where Taxpayers and Advisers Meet

Buy to Let with Step Father as tenant

Tax Questions
Joined:Sun Aug 30, 2015 7:26 pm
Buy to Let with Step Father as tenant

Postby Tax Questions » Sun Aug 30, 2015 7:42 pm

I bought a property in 2008, my first property. I bought it as I wanted a foot on the ladder but also it coincided with my mother and step father getting divourced.

My father moved in and was happy to pay £600 rent, a figure that was close to market rate but reflected my cost of interest only mortgage at the time.

I thought nothing else of it, the property until 2012 and rate reduction to SVR was not making a profit. However I have now been advised to make a declaration under the LET PROPERTY CAMPAIGN for the income.

My question is how best to change the circumstances, as it feels inefficient to be paying tax on money received from my father.

Some basic numbers:
Last year I became a 45% tax payer
The house is worth c£225,000
Interest only mortgage of £150,000 in my name
I have £50,000 in an offset account changing the interest payable from £330 to £190.
I am married my wife is a 20% tax payer
My father is 75 and retired
The property has never been my main residence and I have owned a other property since 2010.

Joined:Fri Nov 04, 2011 5:26 pm

Re: Buy to Let with Step Father as tenant

Postby nikkisizer » Mon Aug 31, 2015 7:22 am

Hello Tax Questions,

Your rental income should have been declared to HMRC and you should have been completing annual self assessment tax returns to declare this income from the start.

I am assuming from your post you have not registered for self assessment to declare this income.

HMRC is targeting tax evasion by residential landlords so it is in your interests to declare this rental income now.

Happy to help so if you need any further assistance please do not hesitate to contact me.
Kind regards,

Nikki Sizer

Sizer & Co Accountants

Birmingham - London - Manchester - Leeds

Tax Questions
Joined:Sun Aug 30, 2015 7:26 pm

Re: Buy to Let with Step Father as tenant

Postby Tax Questions » Mon Aug 31, 2015 8:18 am


Thank you for your reply. You are right I am late in declaring this and I am now completing self assessment and also going through the LET PROPERTY CAMPAIGN to correct the situation with HMRC. It was naivity I hadn't declared the income before I am not looking to avoid this. But moving forward as it is a relative I hope of a more cost effective / tax efficient method as paying income tax on money from my step father seems inappropriate.

So my question focuses on how do I change the circumstances so that I no longer receive 'income' but the mortgage is still covered. This was done more to help my father out so he didn't need to buy a house rather than an investment.

I have read about beneficial sharing between spouses of 99% and 1% can this be done with my wife? If so do we need to inform the mortgage company - as I would be reluctant to change terms as we are on 0.25% above base rate. Or could I split the ownership of the house with my step father and he then pay a smaller portion of rent as the sole occupant, is their a minimum for which you need to declare to HMRC?

Thank you.


Joined:Wed Aug 06, 2008 3:22 pm

Re: Buy to Let with Step Father as tenant

Postby King_Maker » Mon Aug 31, 2015 10:24 am

I assume you have calculated whether you have made a profit (rent less allowable expenses) for the relevant tax years?

There is no requirement to advise rental losses to HMRC.

If the property is let at a commercial rent, any losses are automatically set against any future profits.

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