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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I have a flat to rent. If my granddaughter lives in it with

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I have a flat to rent. If my granddaughter lives in it with a reduced rent. It is farcical to have to pay tax on that income. Why cannot I, at least, say she is giving her dear Grandfather £250 of it, per month as a gift -i.e. £3,000 p.a. which is permissable.
Ernest collier
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your questionPlease advise what the likely rent is and that who is responsible for paying the bills. Many thanks
Customer: replied 1 year ago.
My granddaughter is paying £400 - Local rate for such a flat is £900. She is paying council tax and utilities. I am paying for maintenance and insurance. If I reduced the rent to £250 ppepr month I would be in negative situation and would only carry the negative amount forward to next year and so on. I would not be asking for your advice in that case !!would I? .
Also if I was carrying the loss forward each year, which I would be doing if I reduced the rent to £150 (i'e' £400 less £250 (gift)) could I amalgamate it with another flat there for which I am getting £850 each month and so reducing that tax a little. Also these allowances £3000 £5,000 for a wedding gift, which one may give once a year - does the recipient have to be related as my son-in-law's sisters daughter is getting married soon and I would like to help them getting a house and would be willing to give them the £5,000 allowance.
Customer: replied 1 year ago.
Also I do not have any document relating to my granddaughter paying me rent. i.e. no rent agreement
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your question...If you had an arrangement with your granddaughter whereby she is making a contribution towards the upkeep of the flat and not actually paying you rent albeit £400pm, then it is not deemed income in your hands and therefore not chargeable to income tax.There are restrictions on what percentage expense you can offset against rental income if the property is let at below market rate.In my view you should not link the potential loss on this flat to profit on rental income from another flat.Your granddaughter could give you a gift of up to £3,000 every year and this would be out of scope of all taxes.Wedding gifts and other gifts tax free amounts for inheritance tax purposes are covered here in detail .. basically £5,000 if given to a child and £2,500 if given to a grandchildhttps://www.gov.uk/inheritance-tax/gifts I hope this is helpful and answers your question.If you have any other questions, please ask mebefore you rate my service – I’ll be happy to respond.
Customer: replied 1 year ago.
This allowance of £3,000. Does it have to be a relative?, or may it be occasionally a personal life long friend. Also is there a booklet or www. about tax which I can get from the Library or this computer.And although I am 91 years old I would not be giving it as an inheritance tax gift or to escape that tax.
Customer: replied 1 year ago.
Also if my granddaughter leaves this flat so that her student friend continues there. I shall put the rent up by £100 per month. Can she give £250 per month as agift or contribution towards the upkeep of the flat. Sorry for being so awkward but my son is a chartered accountant and watches over my thoughts as well as my finances.
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply.Gifts of upto £3,000 pa can be given to anyone and not just restricted to a relative. This falls within the annual exemption for IHT purposes. More information on tax free gifts can be found on websites herehttps://www.gov.uk/inheritance-tax/giftsand herehttp://www.which.co.uk/money/tax/guides/inheritance-tax-explained/inheritance-tax-planning-and-tax-free-gifts/ She can continue to give £250 per month as a gift or contribution towards the upkeep of the flat. I hope this is helpful and answers your question.If there are no more issues I will appreciate if you would kindly rate/accept the service Iprovided to ensure I get credited for it by Just Answer.
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Expert:  taxadvisor.uk replied 1 year ago.
I thank you for accepting my answer. Best wishes