I am the property Owner. My sister will be living there as the Landlord, who pays tax

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    I am the property Owner. My sister will be living there as the Landlord, who pays tax

    Hello,

    I have just purchased a house, I am the owner. I am letting my sister live there for free and she is going to rent out the other 3 rooms to her friends.

    Ideally, she would be the live in 'Landlord' and get the £7500 tax free allowance for renting spare room. And she will also have her £10100 tax allowance as she is a student. Therefore a total of £17600 tax free allowance?

    Would she be able to this legally?

    OR i could get her to sign an Assured short term tenancy with her as the only tenant, with the ability to have lodgers.

    She could then be the Landlord and have lodgers in the space. She would then pay me £250 a month rent for the house, and get £500 a rent for each room. (So she would get a total of £1500 a month) which could then be used to do up the house, buy furniture etc without going through me?

    Your thoughts would be helpful. I have rung the tax man and the council and no one seems to know...

    Thank you

    Tom

    #2
    Whoever receives the income pays the tax.
    So it's best not to have people paying your sister who pays you, as then there's two lots of tax, hers and yours (unless it's beneath both of your tax thresholds).
    Ideally you want a notional "peppercorn" rent, so that there is rent (because you can't have an AST without one) - I'd get professional advice, because it can be tricky if the rent is artificially low.

    The you pay tax on the peppercorn and your sister pays tax (or not as you note) on the rent.

    Your sister can take in lodgers, but more than one and the property becomes an HMO, which may require planning permission or licensing (the local authority will advise).
    The requirements for a non-license required HMO are almost identical to one that needs licensing - and may require some building work (wired alarms and fire resistent doors, for example).
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Can be done, but it sounds stupid ( Others will say it is not )

      You own the property.
      You are responsible to maintain the property, walls, roof, underground sewers.driveways, garage etc etc.
      Not a tenant.

      There are MANY posts on here that say "NEVER let any family your expensive property" as too many refuse to maintain YOUR property.

      To Let a house and receive only £ 250 per month is stupid.
      You must let your house to none relative for a minimum of £ 600 per month for you. ( you receive £ 600 )
      WHY should your sister make more money than you, the owner.

      Many times relatives do not do what they say they will do because they cant get enough people to rent the rooms, and will refuse to pay you a penny because they don't have enough income.

      Doing what you describe will eventually cause you be a failure and a costly fight to rectify.

      Comment


        #4
        Ram makes valid observations. Never a good idea renting to friends/family.
        A 4 bed house must be worth £500 pcm?
        As a LL you have many resps/liabilities, inc making annual tax returns.
        Charge sister approx. market rent for whole property and require a deposit.
        She then becomes resp for 'her' lodgers.
        As a LL, you need to act like a professional and need to understand LL&T Law.
        How you act/rent to is up to you.

        Comment


          #5
          She is not the owner of the property so "The Rent a Room Scheme allows owner occupiers " does not apply. You are the owner. Regards Peter

          Comment


            #6
            Originally posted by TaxationPete View Post
            She is not the owner of the property so "The Rent a Room Scheme allows owner occupiers " does not apply. You are the owner. Regards Peter
            You don;t have to own a property to be landlord (common on those dodgy "guaranteed rent"schemes/scams some agents run,...) and gov.uk says....
            https://www.gov.uk/rent-room-in-your...-a-room-scheme
            Eligibility

            You can opt in to the scheme at any time if:

            you’re a resident landlord, whether or not you own your home
            you run a bed and breakfast or a guest house
            -etc etc etc
            Think you'll find rent-a-room applies to those who e.g. rent a place & then, whilst resident, have lodgers. Why would it not apply?
            I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

            Comment


              #7
              Hi Tomj

              Is there a mortgage secured on this property ? if yes have you obtained a Consent to Let agreement or is it a Buy to Let property. To add to the complication unless you have expressed permission , you cannot have a member of the immediate family in residence as this would make the loan if mortgaged as a Buy to Let a Regulated Buy to Let and as such unless the loan was structured as Regulated Mortgage you would be in breach even if she does not pay any rent.
              You make mention of her letting the individual rooms , unfortunately she has no rights to let the property either under the Rent a room scheme or as conventional AST's as you cannot sublet the property the property.

              I make these comments as I have today spent hours talking with lenders on a very discreet basis where a new client had been advised by his accountant to "lease" the properties to a new SPV of which he was the sole director , who in turn would enter into an agreement with another corporate entity and for the rents to be paid to his new SPV. At the end of my research I was made very aware by all lenders with whom he held mortgages that a landlord who tries to circumvent the terms of the mortgage would be considered in serious breach and could be subject to having a receiver of rents appointed.

              Clearly if there is no mortgage secured on the property you are perfectly at liberty to do as you so wish.

              Comment

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