Tax credits when own 2 properties.

[flissypix]

I am very confused about the rules can anyone help. Basically my h and me are separating I work full time but not a good salary. We jointly own the house we live in v little equity as we only just moved a year ago and I own a small 2 bed which we rent out. The rent just covers the mortgage and there is no equity in it at all as it was done on 100% mortgage before the market crashed. If h moved into that house would I be able to Claim tax credits? I can’t afford to pay the mortgage and bills (of either house as there is little difference on the montly costs and value ) on my salary alone and if he moved into that house he would have to pay that mortgage and wouldn’t be able to pay the other. Together we have a decent salary and living standard apart it can’t stretch to two homes.
The end soloution is that he ’buy’ the small house from me and but obviously that’s not going to happen over night plus I am worried that would leave him with the small house and an interest in our house. I don’t want to rush into anything but we can’t continue living together. He is staying at his mums at the moment but that’s too far from the children and not practical. I am looking at ways to increase my salary and I am retraining as I certainly don’t want to be reliant on benefits but that is likely to take a couple of years.
It’s all very confusing.

I believe tax credits are based on your income?

Wouldn’t the better solution be to sell one of the properties?

If you own the flat yourself, but don’t want to live there, then sell the flat and you buy your husband out of the main house. He can then rent/buy as he wants.

Or you sell the joint house and you & DC move into the flat?

Sorry - I see you say neither has much equity.

Doesn’t make a difference to tax credits.

Tax credits are based on taxable income. As you won't have any taxable income from them then it will not make any difference to your entitlement. However, if you are currently getting some taxable income from your buy to let then that will be taken into account when you first claim as tax credits are partly based on income in the previous tax year.

I think you need to see a solicitor and work out what a fair split of assets would be. I wouldn't be letting him live in the house you own until you've done this. When people initially split it can be too easy to sleepwalk into an arrangement that actually ends up costing you dearly. You would be responsible for the mortgage, what would happen if he stops paying the rent? He may say now that he wouldn't dream of doing anything like that but he wouldn't be the first Dad to suddenly realise that after paying maintenance etc he has nothing left of his wages for his own fun.

Just be cautious and take proper advice. If he is going to buy it off you then he does that before you let him occupy it. You use the money you get from that sale to buy him out of your own house.

In many areas you would have to make a claim for Universal credit instead of tax credits ( it depends on your area ). You cannot claim Universal credit with savings/ capital over 16k and over 6k the amount you receive would start to decrease. Just something to bear in mind if there was equity split from either sale. I think the second house might count as capital it just depends how things are split guess.

Thank you for all the replies its very confusing I think my main question is if the 2nd property would be considered capital. Those suggesting legal advice before letting him move in are 100% right I didn't even think that he might not pay the mortgage and that's in my name. I just think having him nearer would be better for the children. I do currently get a rental income off the 2nd property which only just covers the mortgage so doesn't actually provide any income so I thought if he was living there that would be better but actually I may just be in same position until he buys it from me.
There is no equity in the house we do have savings though but not sure it would be over £6k each split especially after costs.
Maybe a stupid question but do the children's savings count they each have a small amount in their names maybe a total of £4k from an inheritance which was left to me but I put some away for them.

I think you should maybe ask CAB for some fuller advice but from what i understand

• children's money does not count as your assets as long as it's in their names and you've not just put it there to avoid having it count as yours
• only the interest on the mortgage can be offset against the income - whatever you're paying off the capital cannot. So you should already be paying tax on the profits from renting the house out
• I'm not sure about whether you can own a second home. Probably best to put the spare house in DH's name

If you are married it's not your house it's jointly owned regardless of whose name it's in.