Lettng second property (mother's inherited a house)

[Aiko]

I'm a complete beginner, I do apologise if I'm not giving enough information.

I am living abroad for a couple of years and my husband and I rent out our family home with full management from an agency.

The rent money comes to our joint bank account and we each declare half the rent on our UK tax return. This is my only source of income, I do not work.
We do not pay income tax on this rent because we are abroad.

Now, my very elderly mother has inherited a friend's house and the responsiblity is frightening and overwhelming her. She wishes to rent it out but just can't cope with it and has had her head in the sand about it leaving us with a very tight deadline.

My sisters and I have decided to transfer the house to me and I will rent it out, separate to my own house, but through the same letting agent.

The rent will come to my own bank account, not the joint marital one and I will transfer the money to my mother.

I am speaking to the solicitor and ringing the tax office tomorrow but I have little time as this must all be sorted on Monday. I can't think of anyone else I can ask.
I don't want to miss any questions that I could be asking tomorrow because of my ignorance and poor understanding of rentals and I won't get another chance because of the deadline.

If anyone can help I would be extremely grateful, or if there's something I should think about that occurs to you, I would love to hear it.

Will adding a second rental property impact us? Are there any rules for two properties rather than one?
Will we be a business rather than a private home rental?
Will we still be able to avoid income tax on our own home or will a second property affect this?

I'm so sorry to be so naive!

[havensRus]

Why don't you just ask your mum or sisters to use the same letting agency to manage the property for your mum? Then the rent goes direct to her, and she declares it on her tax returns, and its dealt with accordingly.

There's no limit on the number of rental properties you can have provided you can afford to buy/own them in the first place. You just have to declare the income on your tax returns.

I've no idea about tax implications of the transfer to you, you living abroad etc... so sorry can't comment on that one.

[Aiko]

Thank you so much for replying.

We need to transfer the house out of my mother's name as she has just gone into panic mode and cannot cope with the burden of it. My deceased father did everything for her and she has no idea how to do anything so does nothing.

The house has been empty and ready for tenants since the spring and she keeps stalling over the most ridiculous reasons - currently it's because one plug socket needs replacement, so tenants can't even view it apparently.
Now she can't afford the council tax (which tenants would have been paying but we daughters are paying instead) and is worried about the winter bills and security of the house in the dark nights. Soon the central heating will go on to stop the pipes freezing and we'll all have to find the money to pay for that.
We realise now that she is never going to actually rent it out even though she wants to.

We, the daughters, can't do anything to help her because it's all in her name, she has the say and she's not saying anything to anyone! We're just powerless watching this inertia and the bills for this empty house mount up.

She has now suggested (thank goodness!) that one of us should own it and now we discover that we're up against a deadline to do this (it needs to be done within two years of the previous owner's death.)

So it needs to belong to one of us so we have the power to actually get things done, starting with the the plug socket! I'm the best choice although I live abroad.

[jeffrey]

As your mother owns it, in sole name, be very sure that the Transfer is what she irrevocably wants. It sounds like a recipe for future family disputes.
For that reason, she must take independent legal advice.

[teeps]

if you and your sister stop taking resposibility for the bills and council tax and leave your mother to sort it out herself if she cannot make up her mind what to do.she will soon decide what is best if she has to face the bills herself.you and your sister are condoning her behaviour!have you thought about capital gains tax which may be payable if she gives the house away?also she cannot just give it away and then still have an interest in it by having the rent.

[quarterday]

house to be transferred to you

I think this sounds fine. It might be an idea to have a deed of trust which records that you hold the house as nominee for yourself and any other beneficiaries just so that there is a contemporaneous record of the basis of transfer. The deed of trust need not be done immediately but as soon as reasonably possible will suffice

[Gordon999]

Aiko,

At present on your annual tax return, you are declaring 50% of rent less agents fee from your own house. You are still liable to pay income tax even if you are abroad. But since the income is below your single person personal allowance of 6,475 ( 2009-2010 ), you are not charged any tax.

If the property no. 2 is held in your name, then on your next tax return, you will declare your income as 50% of house No1 plus 100% of house No2 ( less the normal operating expenses allowed by HMRC ). If the total income exceeds your personal allowance , the excess amount above will be charged at 20% (basic rate).