Family and mortgage woes/question
Discussion
Gents - lookng for some advice here - please bare with me:
Situation - Parents (not married, lived together for 37 years) are splitting up. Reason - Dad (the dirty old sod can't keep it in his pants at the age of 67).
They own their house 50:50 and have maybe 100k left to pay off. They also own outright 3 flats and an office unit (hence teh o/s mortgage on their house).
They also lent me 80k to buy a flat, which I still own, but do not live in (am now offshore and no-longer a UK taxpayer as at 23rd July this year). I pay this loan back at cost every month. The flat is on the market, but not selling....I could probably shift it for 20-30k less than what I paid for it if I had to sell.
The plan (as I understand it) is for mum to move out after Christmas and find somewhere smaller than an old Cornish 4 bedroom terraced house. They are also planning to sell the family home - not sure about the investment property.
I've suggested that mum move into my flat, and she has offered to buy it from me if I cannot sell it/she likes living there.
Is there anything I should be wary of/can do to reduce tax (Stamp, CGT, Inheritance etc)? Am I better off renting it to mum, or selling? Bare in mind that I am currently paying back the money they lent me....Mum's normally good with numbers, but she's understandably all over the place at the moment, so I thought I'd turn to the PH massive for their usual considered and thoughtful advice....
Situation - Parents (not married, lived together for 37 years) are splitting up. Reason - Dad (the dirty old sod can't keep it in his pants at the age of 67).
They own their house 50:50 and have maybe 100k left to pay off. They also own outright 3 flats and an office unit (hence teh o/s mortgage on their house).
They also lent me 80k to buy a flat, which I still own, but do not live in (am now offshore and no-longer a UK taxpayer as at 23rd July this year). I pay this loan back at cost every month. The flat is on the market, but not selling....I could probably shift it for 20-30k less than what I paid for it if I had to sell.
The plan (as I understand it) is for mum to move out after Christmas and find somewhere smaller than an old Cornish 4 bedroom terraced house. They are also planning to sell the family home - not sure about the investment property.
I've suggested that mum move into my flat, and she has offered to buy it from me if I cannot sell it/she likes living there.
Is there anything I should be wary of/can do to reduce tax (Stamp, CGT, Inheritance etc)? Am I better off renting it to mum, or selling? Bare in mind that I am currently paying back the money they lent me....Mum's normally good with numbers, but she's understandably all over the place at the moment, so I thought I'd turn to the PH massive for their usual considered and thoughtful advice....
We were in a very similar situation (property wise) when we left the UK.
Our option (due to the fall in value of the properties) was to rent to the MiL with agreement from the mortgage company - you don't have this problem.
You do have the problem that without an official loan against the property offsetting the income against tax will be more difficult, so your non UK-tax status would and is at risk. You can only offset interest payments.
You can avoid CGT only by selling within (IIRC) three years of leaving a residential property that was your main residence, although you won't have any as you have no profit.
Being a non-resident landlord has not caused any problems for us, but we were warned to keep it to one property each in the UK if we wanted to keep the tax situation relatively simple.
Our option (due to the fall in value of the properties) was to rent to the MiL with agreement from the mortgage company - you don't have this problem.
You do have the problem that without an official loan against the property offsetting the income against tax will be more difficult, so your non UK-tax status would and is at risk. You can only offset interest payments.
You can avoid CGT only by selling within (IIRC) three years of leaving a residential property that was your main residence, although you won't have any as you have no profit.
Being a non-resident landlord has not caused any problems for us, but we were warned to keep it to one property each in the UK if we wanted to keep the tax situation relatively simple.
There are sometimes requirements for non-rax resident landlords tto deduct tax at source from their rental income - especially iof the rents are being handled by an agent. You will get a tax credit for such tax deducted at source.
You would need to check up on the rules relating to "Non-Resident Landlords" and any Self Assessment requirements relating to this area..
You would need to check up on the rules relating to "Non-Resident Landlords" and any Self Assessment requirements relating to this area..
Eric Mc said:
There are sometimes requirements for non-rax resident landlords tto deduct tax at source from their rental income - especially iof the rents are being handled by an agent. You will get a tax credit for such tax deducted at source.
You would need to check up on the rules relating to "Non-Resident Landlords" and any Self Assessment requirements relating to this area..
Eric, I thought, probably wrongly, that the main benefit of using a registered agent was their ability to strengthen the case for tax to not be deducted at source?You would need to check up on the rules relating to "Non-Resident Landlords" and any Self Assessment requirements relating to this area..
Certainly that was how it was presented by my agent, and to be fair he did exactly that.
How would the Revenue look at the loan situation around this case?
davemac250 said:
We were in a very similar situation (property wise) when we left the UK.
Our option (due to the fall in value of the properties) was to rent to the MiL with agreement from the mortgage company - you don't have this problem.
You do have the problem that without an official loan against the property offsetting the income against tax will be more difficult, so your non UK-tax status would and is at risk. You can only offset interest payments.
You can avoid CGT only by selling within (IIRC) three years of leaving a residential property that was your main residence, although you won't have any as you have no profit.
Being a non-resident landlord has not caused any problems for us, but we were warned to keep it to one property each in the UK if we wanted to keep the tax situation relatively simple.
Thanks for the replies. To clarify, Mum and Dad "gifted" me 80k to buy the flat, plus I have a mortgage of about 120k outstanding. I pay the mortgage back and cover the interest on the loan that my parents gave me. Our option (due to the fall in value of the properties) was to rent to the MiL with agreement from the mortgage company - you don't have this problem.
You do have the problem that without an official loan against the property offsetting the income against tax will be more difficult, so your non UK-tax status would and is at risk. You can only offset interest payments.
You can avoid CGT only by selling within (IIRC) three years of leaving a residential property that was your main residence, although you won't have any as you have no profit.
Being a non-resident landlord has not caused any problems for us, but we were warned to keep it to one property each in the UK if we wanted to keep the tax situation relatively simple.
Interesting to hear about the CGT situation, not that I expect to realise a gain on the property. So I'd have to notify the revenue about the rental income as a non-UK resident landlord along with the rest of my tax return.
One possibility is for mum to buy me out with the money realised on the sale of their house (I think they'd keep the flats as they would be liable for CGT and are providing a decent income as mum has little pension due to not working for 35 years).
Eric - any idea on who would be the best person for my mum to talk to - accountant or lawyer, or both (and does their marital staus/lack of cause any problems)?
Bing o said:
davemac250 said:
We were in a very similar situation (property wise) when we left the UK.
Our option (due to the fall in value of the properties) was to rent to the MiL with agreement from the mortgage company - you don't have this problem.
You do have the problem that without an official loan against the property offsetting the income against tax will be more difficult, so your non UK-tax status would and is at risk. You can only offset interest payments.
You can avoid CGT only by selling within (IIRC) three years of leaving a residential property that was your main residence, although you won't have any as you have no profit.
Being a non-resident landlord has not caused any problems for us, but we were warned to keep it to one property each in the UK if we wanted to keep the tax situation relatively simple.
Thanks for the replies. To clarify, Mum and Dad "gifted" me 80k to buy the flat, plus I have a mortgage of about 120k outstanding. I pay the mortgage back and cover the interest on the loan that my parents gave me. Our option (due to the fall in value of the properties) was to rent to the MiL with agreement from the mortgage company - you don't have this problem.
You do have the problem that without an official loan against the property offsetting the income against tax will be more difficult, so your non UK-tax status would and is at risk. You can only offset interest payments.
You can avoid CGT only by selling within (IIRC) three years of leaving a residential property that was your main residence, although you won't have any as you have no profit.
Being a non-resident landlord has not caused any problems for us, but we were warned to keep it to one property each in the UK if we wanted to keep the tax situation relatively simple.
Interesting to hear about the CGT situation, not that I expect to realise a gain on the property. So I'd have to notify the revenue about the rental income as a non-UK resident landlord along with the rest of my tax return.
One possibility is for mum to buy me out with the money realised on the sale of their house (I think they'd keep the flats as they would be liable for CGT and are providing a decent income as mum has little pension due to not working for 35 years).
Eric - any idea on who would be the best person for my mum to talk to - accountant or lawyer, or both (and does their marital staus/lack of cause any problems)?
LTV is going to be an issue and you may have to change to a BTL mortgage - some mortgage companies will allow you to remain on residential (mine did) if you state that the move abroad is for a fixed term and you'll be returning to the house. This is getting harder to secure.
In the circumstances you outline, unless you have a reason to keep the flat it looks like time to let it go if your finances can take the negative equity?
s
tty situation to be in - ours was different as both properties had been owned long term and have relatively low mortgages compared to value.Are you missing the elephant in the room here - 3 other properties let out with no mortgages on them. Why not remortgage 1, 2 or 3 of them to release capital and they can do as they wish. Rental income can be offset against interest on mortgage
Also bit concerned why they have a £100k mortgage on their main home at 67.
Also bit concerned why they have a £100k mortgage on their main home at 67.
Kudos said:
Are you missing the elephant in the room here - 3 other properties let out with no mortgages on them. Why not remortgage 1, 2 or 3 of them to release capital and they can do as they wish. Rental income can be offset against interest on mortgage
Also bit concerned why they have a £100k mortgage on their main home at 67.
Didn't they give their son £80k of that £100k? Although I agree it should have been on the others but maybe they were not suitable vehicles for that amount.Also bit concerned why they have a £100k mortgage on their main home at 67.
Edited by OneDs on Friday 12th November 10:35
OneDs said:
Kudos said:
Are you missing the elephant in the room here - 3 other properties let out with no mortgages on them. Why not remortgage 1, 2 or 3 of them to release capital and they can do as they wish. Rental income can be offset against interest on mortgage
Also bit concerned why they have a £100k mortgage on their main home at 67.
Didn't they give their son £80k of that £100k? Although I agree it should have been on the others but maybe they were not suitable vehicles for that amount.Also bit concerned why they have a £100k mortgage on their main home at 67.
Edited by OneDs on Friday 12th November 10:35
davemac250 said:
Eric Mc said:
There are sometimes requirements for non-rax resident landlords tto deduct tax at source from their rental income - especially iof the rents are being handled by an agent. You will get a tax credit for such tax deducted at source.
You would need to check up on the rules relating to "Non-Resident Landlords" and any Self Assessment requirements relating to this area..
Eric, I thought, probably wrongly, that the main benefit of using a registered agent was their ability to strengthen the case for tax to not be deducted at source?You would need to check up on the rules relating to "Non-Resident Landlords" and any Self Assessment requirements relating to this area..
Certainly that was how it was presented by my agent, and to be fair he did exactly that.
How would the Revenue look at the loan situation around this case?
If you had a loan to purcahse the property then you can deduct interest on that loan from your rental income. Other costs, subject to the usual rules, can also be deducted.
HMRC Manual reference here:
http://www.hmrc.gov.uk/manuals/pimmanual/PIM4800.h...
Bing o said:
Gents - lookng for some advice here - please bare with me:
Situation - Parents (not married, lived together for 37 years) are splitting up. Reason - Dad (the dirty old sod can't keep it in his pants at the age of 67).
They own their house 50:50 and have maybe 100k left to pay off. They also own outright 3 flats and an office unit (hence teh o/s mortgage on their house).
They also lent me 80k to buy a flat, which I still own, but do not live in (am now offshore and no-longer a UK taxpayer as at 23rd July this year). I pay this loan back at cost every month. The flat is on the market, but not selling....I could probably shift it for 20-30k less than what I paid for it if I had to sell.
The plan (as I understand it) is for mum to move out after Christmas and find somewhere smaller than an old Cornish 4 bedroom terraced house. They are also planning to sell the family home - not sure about the investment property.
I've suggested that mum move into my flat, and she has offered to buy it from me if I cannot sell it/she likes living there.
Is there anything I should be wary of/can do to reduce tax (Stamp, CGT, Inheritance etc)? Am I better off renting it to mum, or selling? Bare in mind that I am currently paying back the money they lent me....Mum's normally good with numbers, but she's understandably all over the place at the moment, so I thought I'd turn to the PH massive for their usual considered and thoughtful advice....
Situation - Parents (not married, lived together for 37 years) are splitting up. Reason - Dad (the dirty old sod can't keep it in his pants at the age of 67).
They own their house 50:50 and have maybe 100k left to pay off. They also own outright 3 flats and an office unit (hence teh o/s mortgage on their house).
They also lent me 80k to buy a flat, which I still own, but do not live in (am now offshore and no-longer a UK taxpayer as at 23rd July this year). I pay this loan back at cost every month. The flat is on the market, but not selling....I could probably shift it for 20-30k less than what I paid for it if I had to sell.
The plan (as I understand it) is for mum to move out after Christmas and find somewhere smaller than an old Cornish 4 bedroom terraced house. They are also planning to sell the family home - not sure about the investment property.
I've suggested that mum move into my flat, and she has offered to buy it from me if I cannot sell it/she likes living there.
Is there anything I should be wary of/can do to reduce tax (Stamp, CGT, Inheritance etc)? Am I better off renting it to mum, or selling? Bare in mind that I am currently paying back the money they lent me....Mum's normally good with numbers, but she's understandably all over the place at the moment, so I thought I'd turn to the PH massive for their usual considered and thoughtful advice....
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