Landlord & Tenant

[benshepherd]

Hi

Myself, father and brother jointly own a property (one-third share each). The same brother lives in the house with two other tenants. We are not sure what proportions of income and expenses to use on my brother's tax return. My father and I simply declare one third of the income and expenses each, including the rent that my brother pays (we treat him exactly the same as the other tenants).

However, what proportions of income and expenses does my brother need to declare on his tax return as a one-third share owner but also a tenant of the house?

Thanks!

[Guest caravanj]

Hi

Myself, father and brother jointly own a property (one-third share each). The same brother lives in the house with two other tenants. We are not sure what proportions of income and expenses to use on my brother's tax return. My father and I simply declare one third of the income and expenses each, including the rent that my brother pays (we treat him exactly the same as the other tenants).

However, what proportions of income and expenses does my brother need to declare on his tax return as a one-third share owner but also a tenant of the house?

Thanks!

Your brother's tenancy has no bearing on his income tax liability. He is a third owner so his income & expenses (from the property) will be the same as that of you & your father.

[Richlist]

Your brother's tenancy has no bearing on his income tax liability. He is a third owner so his income & expenses (from the property) will be the same as that of you & your father.

I'm not convinced that is entirely correct.

Whilst you and your father can claim 1/3rd of the income each your brothers situation is different. Surely he cannot claim a third of the income as he is paying that third himself and cannot use his personal housing costs against his rental business ?

[benshepherd]

Your brother's tenancy has no bearing on his income tax liability. He is a third owner so his income & expenses (from the property) will be the same as that of you & your father.

I'm not convinced that is entirely correct.

Whilst you and your father can claim 1/3rd of the income each your brothers situation is different. Surely he cannot claim a third of the income as he is paying that third himself and cannot use his personal housing costs against his rental business ?

Thanks for your replies.

I was thinking along the same lines as Richlist. My brother cannot pay himself rent and also surely he is liable for his one-third of the expenses as a tenant: i.e. he cannot offset his share of expenses against tax as they are his personal living expenses.

I think I may need to get an accountant this tax year. Once I see what he/she does, I will know for future tax years.

Cheers

Ben

[Richlist]

On the few occasions that I have needed the advice of an accountant I've just made an appointment and explained my query to them. They have either given me the answer for free or I have just paid for that one consultation and have still done my own tax returns.

So, you may find doing the same will be anything from free to £50.

Good luck.

[Guest caravanj]

Your brother isn't paying himself rent, he's paying it into a business that's owned by 3 of you from which he takes a share of the profit. Your accountant should tell you that.

That's why my first answer started by saying his tenancy has no bearing on his part ownership of the house which is a business.

However I do accept things may have changed from the time when I did tax investigations.

[benshepherd]

Caravanj,

OK, that makes sense when you explain it like that - thanks. What about his expenses though (loan interest, repairs etc)? Can he offset his share of the expenses against tax still?

Thanks

Ben

[Guest caravanj]

Caravanj,

OK, that makes sense when you explain it like that - thanks. What about his expenses though (loan interest, repairs etc)? Can he offset his share of the expenses against tax still?

Thanks

Ben

Sorry for the delay in replying but I've been busy starting to sort out my wrecked property!!

Your rental property is a stand-alone business so all the income & running expenditure is combined for the business. Any profits are then split 3 ways & each of you pay tax according to your personal tax circumstances. If any of you have taken a loan / mortgage to buy your 3rd share in the rental property then you can offset the interest paid against your income from the property.

The fact that your brother is also a tenant is irrelevant to the tax issue.

When your self-assessment tax return is due, I would suggest you buy the personal edition of TaxCalc which allows you to do up to 12 returns. The program walks you through the return & you don't need to know anything about the income tax rules since it's all done for you. TaxCalc checks all your entries & it won't allow you to submit an incorrect return, but of course it relies on you entering honest figures in the first place!! The program costs around £25 & would do all 3 of your returns.

https://taxcalc.com/products/home.php?productType=personal

[Chestnut]

This begins to look unnecessarily complicated!

I see your brother as effectively an owner/occupier paying his household expenses - not part of a 'business'.

Hence I don't think he should be declaring anything of this as 'property' income and expenses for tax.

You and your father should, as equal third joint owners of a rented property, declare your equal thirds of income, expenses and profit from the rental in the normally requested way, as you state.

The suggested £25 tax calc programme will only calculate what you decide and tell it to do. Save your money!

[Guest caravanj]

This begins to look unnecessarily complicated!

I see your brother as effectively an owner/occupier paying his household expenses - not part of a 'business'.

Hence I don't think he should be declaring anything of this as 'property' income and expenses for tax.

You and your father should, as equal third joint owners of a rented property, declare your equal thirds of income, expenses and profit from the rental in the normally requested way, as you state.

The suggested £25 tax calc programme will only calculate what you decide and tell it to do. Save your money!

If Bens & his father each declare their equal 3rds for tax purposes & the brother follows your advice not to declare anything for tax purposes then who declares the remaining 3rd?

Taxcalc must be a complete waste of money which is why most accountants & tax consultants use it or similar programs. Of course it only checks the figures you put into it!!!!!!!!!!!!!!!!!

[benshepherd]

Thanks for all the info - I am grateful for your opinions. I may take a look at the taxcalc out of interest.

I have passed all the info onto my brother and he can decide what he wants to do re. accountant.

Thanks again

Ben

[Guest caravanj]

Thanks for all the info - I am grateful for your opinions. I may take a look at the taxcalc out of interest.

I have passed all the info onto my brother and he can decide what he wants to do re. accountant.

Thanks again

Ben

Wise choice, then if your brother heeds incorrect advice that lands him in a shed-load of grief with HMRC, he won't be able to blame you.

As for TaxCalc, it merely automates the completion of the tax return & checks for arithmetical errors & entries in wrong boxes etc. so that the tax return will be correctly completed.

I didn't think that I'd have to point out to anyone that TaxCalc won't know if your true income is £100,000 if you only enter £50,000, any more that the manual paper return would.

[Richlist]

Your brother's tenancy has no bearing on his income tax liability. He is a third owner so his income & expenses (from the property) will be the same as that of you & your father.

caravanj,

Is this a fact or is it your opinion ?