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  • Tax

    RENTING TO FRIEND

    I have a BTL unit currently rented to a family friend who  is paying me only the mortgage instalment (Interest Only) of £ 650 .The market rental value is around 1250. For tax purposes will HMRC consider my discounted rent or will they take into account the market value?

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    HMRC can't force you to charge any level of rent.

    You could charge nothing.

    No tax is payable on zero rent.


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    I was told that they will ask for market rental value because otherwise anybody can misuse this and show low or zero rent? does that make any sense

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    I believe they will use the actual discounted rent.

    Interestingly, if your friend is paying exactly the mortgage interest and you are a higher rate tax payer, you will now be building up a tax liability thanks to s24. If so,your friend may need to gross up their payment to cover your new tax bill, as well as the interest, or you will be effectively giving them even more of a discount.

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