Rental Income?

[Rootshalle]

Hello,

Bit of advice needed please, FOA to Mods - please move post if better place for it.

I may shortly be putting my mum's house up for letting. I have an Enduring POA. Any rental income received will go towards her care home fees. My question is around the rental income being taxable. Can I set it up in such a way that its in her name not mine, all the income will go to her not me, I will not benefit financially. If she is the named landlord then hopefully that would be OK? I imagine it may depend on level of income which will be approx £900 per calendar month.

WIll be taking some advice but I'm hoping there will be some thoughts out there. Appreciate any ideas...

many thanks

regards - R

 

[jenniferpa]

Well it is her's isn't it? You're really just acting as her agent I would have thought. I think to be on the right side of the COP you have to set it up so that all the funds are going into her bank account (and all the expenses come out of it as well). You're right that you should get some legal advice but I would think this is just the same as acting as an agent for an absentee landlord, no? So whatever best practice would be there, would be best practice here (except you won't be taking a fee for your activities).

 

[Nebiroth]

I would suggest legal advice.

However, it would seem to me that as the house belongs to your mother, not you, and that you are simply acting as her agent. So long as the income is paid to her - to her bank account for example - then I can't see how it could count as yours as far as tax is concerned.

For example, you have access to all of your mother's bank accounts - but you only manage them. The funds are not yours, and any interest earnt on them isn't yours either. It's all your mother's.

I would imagine, though, that income of £900 a month plus your pensions and other income would put your mother over threshold at which she would start to pay tax. It depends on her age as the thresholds rise at, umm, 65 and 80 I believe.

 

[Kayla]

When we let my Mum's house out in 2005, we did it through a letting agent, who arranged everything, including 24 hour cover for emergency repairs. The rental income, minus any expenses was paid directly into her bank account by the agent. We had POA and did not need to pay anything from our bank account.

When Mum died in 2007, the agent paid the money into a special account until the probate was sorted out. It is probably best to get some professional advice before letting, as individual cases vary and there may be ways of reducing the amount of taxes paid. The rules on rental income did seem to be a little unclear.

We found that although Mum was getting a good rental income, it didn't really cover the true costs of maintaining a house. The property was overdue for refurbishment of the kitchen and bathroom, which would have taken decades to make up in rent. Last year, we were able to sell the house at an unexpectedly high price and we don't have the hassle of worrying about tenants.

One advantage of letting a property is that the person in a care home still owns it, which can be helpful at an emotional level. Also, by the time Mum died, two families had been living in her house and it didn't seem like her home any more. We had got used to not having access to the house and it was easier to "let go" after we decided to sell.

There is a lot to consider, before letting a property and not something to be rushed into too quickly.

Kayla

 

[Rootshalle]

Hello,

Just to say thanks for the replies. Yes I'll just be managing this & rent will go directly to Mum's account. All seems straightforward to me but I'd just not considered the taxable income side & thought as I'm doing all the running with agents etc that I somehow get caught up in it all. So much going on I started to see problems that may not actually be there. I will take some advice though & I have been open with the agents on this as well.

many thanks - R

 

[SilverStar]

We have let my mother's home for the last two or three years and the paperwork is in her name. There are allowances you can reclaim so it's worth going to the inland revenue website to check what those are. It was very straightforward, we did it through a letting agent. You do have to register the deposit with an approved scheme these days which wasn't the case when we started renting it out.

However, the tenant we had while initially good, left the place in a mess and we are now having problems over replacing carpets and redecoration and how much of his deposit we can keep.

My sister has been responsible for all these arrangements and with hindsight it would have been a good idea to have had legal expenses insurance to cover advice on this situation and also to cover the rent while the property is being redecorated and can't be let.

One thing to mention is that we are currently having to look at renting for £50 per month less than before due to the glut in cheaper rented property.