Hi,
New Poster here! I really appreciate all the advice given on this forum.
My husband and I own an investment property (2 bed apartment - still mortgaged) in a city in the South East. It has been rented through agents without a break since 2012. Most recent full year's rent (2022) was approx 16K before taxes and tax reliefs. Half way through 2023, the tenants moved out and we decided to upgrade the property at a cost of approx >30k - new kitchen, bathrooms, heating and water system, floors and all fixtures and fittings. It will be ready to be let again in March 2024 and could achieve a rent of approx >20K pa in the upgraded state.
My adult daughter and her partner want to rent it from us. One of them is on minimum wage and one is still a student so they could not afford market rate rent. My adult daughter has a relatively common condition with additional needs so we want to support her at this time as best we can. We intend to rent them one bedroom and keep one for ourselves to use from time to time. The most they could afford together is 700 pcm (350 each). They are likely to need it for approx 2 years. We still need to pay small mortgage, service charges, utilities, insurances and upgrade costs.
Note - we do not want to sell it now as we may wish to retire to this location within approx 7 years and would be unlikely to be able to afford it again in the future.
I'm looking for advice on how to structure this from a good tax management aspect.
1. If we go ahead with this plan, will we be unable to ever claim any tax relief for the 30K upgrade? Under what conditions would any of the upgrade costs ever qualify for tax relief?
2. Would their rent be considered reduced rent in the context of the previous rent declared each year for the overall apartment and thus subject to additional tax for either my daughter or her partner? (Note: we have not implemented the tax free gift of 3K each from us to my daughter as we can not afford that yet due to college education costs).
Thank you to anyone who could offer some tax management advice.
New Poster here! I really appreciate all the advice given on this forum.
My husband and I own an investment property (2 bed apartment - still mortgaged) in a city in the South East. It has been rented through agents without a break since 2012. Most recent full year's rent (2022) was approx 16K before taxes and tax reliefs. Half way through 2023, the tenants moved out and we decided to upgrade the property at a cost of approx >30k - new kitchen, bathrooms, heating and water system, floors and all fixtures and fittings. It will be ready to be let again in March 2024 and could achieve a rent of approx >20K pa in the upgraded state.
My adult daughter and her partner want to rent it from us. One of them is on minimum wage and one is still a student so they could not afford market rate rent. My adult daughter has a relatively common condition with additional needs so we want to support her at this time as best we can. We intend to rent them one bedroom and keep one for ourselves to use from time to time. The most they could afford together is 700 pcm (350 each). They are likely to need it for approx 2 years. We still need to pay small mortgage, service charges, utilities, insurances and upgrade costs.
Note - we do not want to sell it now as we may wish to retire to this location within approx 7 years and would be unlikely to be able to afford it again in the future.
I'm looking for advice on how to structure this from a good tax management aspect.
1. If we go ahead with this plan, will we be unable to ever claim any tax relief for the 30K upgrade? Under what conditions would any of the upgrade costs ever qualify for tax relief?
2. Would their rent be considered reduced rent in the context of the previous rent declared each year for the overall apartment and thus subject to additional tax for either my daughter or her partner? (Note: we have not implemented the tax free gift of 3K each from us to my daughter as we can not afford that yet due to college education costs).
Thank you to anyone who could offer some tax management advice.
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