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Harris, Law Specialist
Category: Law
Satisfied Customers: 2851
Experience:  Family Law - Specialist in Divorce, Financial Relief and Children Matters
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We are about to buy a flat son to live in. He would

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Hi, We are about to buy a flat for our son to live in. He would pay us a modest rental. It is a 2-bedroomed property and if he is happy there he may wish to get a friend to move in for company. If this happens we would want to charge a higher rental which would be closer to the going rate but with our son paying perhaps 1/3 and the friend 2/3.
Would tenancy agreement(s)be necessary and what, in general, would be the tax implications.
ie 1) Should we have to have a tenancy agreement with our son - and pay tax on his modest rental?
2) Should his flatmate have a separate tenancy agreement? (we accept that tax would be due)
3) Would Rent-a-Room be an option for us/our son?
Any help would be appreciated.
Hi, thanks for your question. In relation to your son, it is for you to decide whether you want a tenancy agreement or not, and whether you wished to charge him rent. Rent a room will not be appropriate as this would only be if he is living in your property with you as a lodger. For his friend, you should definitely enter into a tenancy agreement as this will protect you and provide formality when dealing with his residence. Although you should be aware that as a tenant, he will have rights and there is a strict procedure that needs to be followed when evicting him. Also, if you already have a property yourself, this property will be subject to captial gains tax upon sale. Please provide a positive rating if you found this information helpful. I will not be credited with answering this question without a positive rating. Thank yo
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Customer: replied 2 years ago.
Hi, Thanks for that, but a bit more detail required please.
1) If we do not have a tenancy agreement with our son and he pays a modest 'rental' amount towards our costs, should we pay tax on that?
2) Re the rent-a-room question, the question really was would it be an option/beneficial option (to him or us) if he rented the spare room? (and if he rented the room for more than he was paying us)
Customer: replied 2 years ago.
Sorry, I also meant to ask clarification on the capital gains. Presumably that only applies to the flat purchased for our son, not our own home!
No worries 1. Any income you receive will count towards your taxable income, and whether you will be liable to pay tax will depend on what other income is. From April 2016 your personal allowance, which is not subject to tax, is £11,000 per year. Everything above that is subject to tax and all sources of income needs to be taken into account. Whether there is a tenancy agreement or not is not taken into account for tax purposes. 2.If you grant him permission to sublet the spare room, then this would be acceptable. However, for tax purposes, if you receive the income from the lodger and act as the landlord, then this would be subject to the same tax issues as above. If he acts as the landlord and receives the income, then the first £4,250 per year he receives will be tax free. You can read more about it here: 3. Yes, the home you bought for your son will be subject to capital gains tax. The home you live in is exempt from capital gains tax.
Customer: replied 2 years ago.
Thanks, ***** ***** we are nearly there.
If we don't bother with a tenancy agreement for our son, could we simply say to him that he could rent out the spare room (it would probably be around the £4,250 per year figure) or would we have to set that out to him in writing - and would he then need a tenancy agreement with his flatmate, under Rent-a-Room?
Customer: replied 2 years ago.
ie Can our son be classified as the landlord?
No, it would be for him to make the arrangements to be the lodger's landlord - you do not need to have anything formal yourself between you and your son.
Customer: replied 2 years ago.
Thanks. This then prompts what I think will be the last question!! Would he then need an formal agreement, as a landlord, with his flatmate - with the responsibilities for landlord gas safety certificates etc etc?
Yes, he will legally be considered a landlord even if his friend is only a lodger and he will need to ensure that the property is kept in good state of repair - his obligations would be here: He should have an agreement in place that explicitly states that he is a lodger and not a tenant, as lodgers have lower rights than tenants, such as a short notice period to evict them.
Customer: replied 2 years ago.
That's clear now - many thanks
Kind Regards
No worries - if you have any questions in the future you can ask for me directly by starting your question For Harris