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bigduckontax, Accountant
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If my son lives in my property and pays me do i have to declare

Customer Question

if my son lives in my property and pays me do i have to declare this for tax
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
My son bought the flat above ours. We lent him 24,000 for the deposit. After one year he couldn't afford mortgage repayments so we bought the flat from him. For four years he has been repaying the 24k. We have replaced the central heating boiler and built a loft extension. ie made extensive improvements to the property. He, his wife and daughter live there. They pay their own council tax and bills. If they pay (make a contribution to the improvements) do we need to declare this on our tax return. We own our own flat and the one above - no others
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. In basic terms, yes you do. You have o declare the net rental for tax, but there are a number of deductions which can be made. Which gives the following guide to these: 'The most common types of expenses you can deduct are:water rates, council tax, gas and electricitymaintenance and repairs to the property (but not improvements)contents insuranceinterest on a mortgage to buy the propertycosts of services, including the wages of gardeners and cleaners (as part of the rental agreement)letting agents' feeslegal fees for lets of a year or less, or for renewing a lease of less than 50 yearsaccountant’s feesrents, ground rents and service chargesdirect costs such as phone calls, stationery and advertising for new tenantsThe expense should be incurred wholly and exclusively as a result of renting out your property.' When you eventually sell you will be liable to Capital Gains Tax (CGT) on any gain made on disposal, but if you lived in the house before you let it to your son, or indeed after, you would be entitled to Lettings Relief up to 40K as well as your Annual Exempt Amount of 11.1K to offset any gains; that is the general position. Of course, there is another loophole I should mention, if you still occupy the house then your son could be living there under the Rent a Room Scheme [which can be more than a room]. Income from this is tax free if it is below GBP 4250 currently, GBP 7500 15/16 tax year. Use of this Scheme does not involve CGT on disposal. I do hope that I have shed some light on your position.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3364
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
I am so sorry your second part did not appear as I made my answer. The improvements you mention inflate the acquisition price for CGT thus reducing the gain. The loan to him is outside the scope of UK taxation unless interest is paid in which case that element only is taxable. If the 'contribution to improvements' is used to reduce your loan to him then, as I explained, is outside the scope of UK taxation also.
Thank you for your support.

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