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  • Property-a-holics

    Renting to your own kids - any repercussions?

    Hi,

    I have a small property in the London Borough of Southwark that I let as an additional HMO to three people.

    I now would like to rent it to my daughter and her friend at a reduced rate. Are there any repercussions in terms of renting / letting / or tax for her or me?

    Also will there be any problem, should my daughter and her friend move out in the future, to renew my additional HMO licence ?

    Thank you for any advice.

    Anne

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    Only aspect that springs to mind is daughter could not claim LHA as she is/would be  related to landlord.

    Plus they could maybe give you sob stories when rent is due.


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    Hi LandyLordy, I am not too fussed about these two possibilities. But more about whether this could have repercussion on  her or my tax, or HMO licence, or other things to do with me letting the property, that I might not foresee at the moment. I seemed to remember from a course a very long time ago, that there was something, but I cannot for the life of me remember what it was.

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    If you have a mortgage on the property, check the T&Cs as many disallow renting to family.

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    I don't see a problem with the new HMO licence that will be due end of next year, but  your type of mortgage may have terms that disallow you renting to family.

    If you own the property outright (no mortgage though I am guessing you are a leaseholder) and it is in your own name there is another option.  You could rent only to your daughter and allow your new tenant to take in a lodger. This means that the rental income will become your daughters and she will benefit from the Rent a Room relief.

    As I am a fellow Southwark landlord with small HMOs, like your property, I would be interested to know if you have received any communication from Southwark since you obtained your licence, or do you communicate with them on any matters to do with your licence?


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    Hi landlady 1991, thank you for your reply, that is really helpful. I owe the property outright, and might take up your suggestion regarding renting only to my daughter and allowing her to take in a lodger.

    Nice to meet a fellow Southwark landlord with small HMOs. In answer to your question, no I have not received any communication about the licence from them since I obtained mine. I was shocked to see that they only gave 3 years instead of the 5 years licence though as I had done everything to be in order with their regulations. Did they give everyone the same date by which the HMO needs to be renewed then?



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    As already mentioned you can take full advantage of the rent a room scheme, up to £7500 pa tax allowance.

    Overviews here:

    https://assets.publishing.service.gov.uk...138292.pdf

    https://www.gov.uk/government/publicatio...-landlords

    Tax manual here:

    https://www.gov.uk/hmrc-internal-manuals...al/pim4000

    Excellent site here:

    https://www.lodgerlandlord.co.uk/

    You won't have ASTs but excluded occupiers, so no S21 required for possession, legislation here:

    https://www.legislation.gov.uk/ukpga/1988/50/section/31

    You are exempt from HMO additional licencing for your daughter plus up to 2 others, legislation here:

    https://www.legislation.gov.uk/uksi/2006/...ion/6/made

    You are exempt from selective licencing, if its in your area, legislation here:

    https://www.legislation.gov.uk/uksi/2006/370/made

    (You may need to change a few of the links from https to http as PT automatically creates an https link)

    One important point, make sure your daughter moves in before anybody else. If the other occupier(s) moves in first then an AST will be automatically created.

    You can receive the rent a room allowance yourself, but you will need to have lived at the property at some point in the basis period, e.g. you lived there whilst redecorating, but take advice on this.

    Don't forget to inform your insurer of the change, they can be as fickle as lenders.

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    A good teacher must know the rules; a good pupil, the exceptions.

    Martin H. Fischer


    I assume it is not owned through a company, LLP or etc and it’s just you as ATED will likely bite for a London property which family live in.

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022

    Hi Stuart, Thanks for that comment. Actually, it is not a limited company, so am I right that ATED will not apply to this property? I am not familiar with ATED and looked it up, somehow I did not come across this kind of tax before. But also, having read some explanation about it,  I could not see any mentioning of the link between ATED and renting to one's adult child? Can you elaborate  a bit more please? Thank you in advance. Anne

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    Gary, thanks for the wealth of links/info.

    With regard to repercussions of letting to your own child regarding HMO status of the house, my question is really as to whether I would loose the HMO status and then later, when my daughter moves out, only be able to rent to a family instead of multiple households (which can be e.g. 3 singles) ?

    I know that in Brent, if you rent the HMO out to a family, you permanently loose the HMO status and cannot get it back - as they have a lot of properties as student HMOs in the area and want to protect the proportion of family homes versus HMOs. I suppose only the Local Authority can tell me this?

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    I think you're referring to permitted development in an article 4 area. This is planning legislation not licencing.

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    A good teacher must know the rules; a good pupil, the exceptions.

    Martin H. Fischer