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Original poster

Living rent free in my mums house letter from HMRC

167 replies

DollyPumpkin · 21/01/2025 19:37

Hi apologies for the long story, me and my husband have lived in our house for 15 years. We private rented for 5 years as my husband wasn’t able to get a mortgage after having a house repossessed when he divorced from his first wife a couple of years before he met me and we wouldn’t get a mortgage on my wage alone. After 5 years of living in our house our landlord served us notice as she wanted to sell the house. My mums husband had just died and left her a large inheritance and so she decided she wanted to buy our house outright and let us live there rent free which we have done for the last 10 years. Our previous landlord sold her the house at less than market value (£115k) as she wanted a quick sale and we had lived there and paid rent and been good tenants for 5 years.

My mum is an elderly lady, she’s in receipt of state pension and attendance allowance and owns her own home outright with savings (over 100k) She’s today received a letter from HMRC saying they are aware she has a second home which she rents out and asking loads of questions about when she bought it, how much it was and where she got the money from and how much rent she gets and she’s in a right panic about it. I haven’t seen the letter myself, I’m going to go round tomorrow and have a look.

Has she done anything wrong here? Is she likely to be fined or penalised?

Just to add, there is ground rent of £100 a year on the house which she pays and £400 a year service charges which we pay. We also meet the cost of any repairs needed and pay the council tax and all the utilities which are in our names. We don’t have a tenancy agreement or any legal agreement as we didn't think it was necessary as no money exchanges hands but she does pay for landlord insurance.

OP posts:
mashingwachine · 21/01/2025 19:38

Is this to do with pension credit? She would be entitled to some with the AA?

Original poster
DollyPumpkin · 21/01/2025 19:40

mashingwachine · 21/01/2025 19:38

Is this to do with pension credit? She would be entitled to some with the AA?

No she doesn’t get pension credit and hasn’t applied, I don’t think she would be eligible because of her savings. I think they’ve got wind that she owns a second home and are wanting to know how much rent she gets from it as she’s never declared it as there is no income from it.

OP posts:
Alphabet1spaghetti2 · 21/01/2025 19:42

I suspect that hmrc are thinking she gets an income from the second (your home) property, and as such are looking to see if there is tax owing on the rental income they think she’s receiving.

Porkyporkchop · 21/01/2025 19:42

She isn’t getting rent , so I guess this needs to be explained to the HMRC.

qwertyasdfgzxcv · 21/01/2025 19:43

So she lives in her prinary residence and you live in her second home but don't pay any rent, just the bills?

A letter to HMRC to explain this is the first step

GrandmotherStillLearning · 21/01/2025 19:44

DollyPumpkin · 21/01/2025 19:37

Hi apologies for the long story, me and my husband have lived in our house for 15 years. We private rented for 5 years as my husband wasn’t able to get a mortgage after having a house repossessed when he divorced from his first wife a couple of years before he met me and we wouldn’t get a mortgage on my wage alone. After 5 years of living in our house our landlord served us notice as she wanted to sell the house. My mums husband had just died and left her a large inheritance and so she decided she wanted to buy our house outright and let us live there rent free which we have done for the last 10 years. Our previous landlord sold her the house at less than market value (£115k) as she wanted a quick sale and we had lived there and paid rent and been good tenants for 5 years.

My mum is an elderly lady, she’s in receipt of state pension and attendance allowance and owns her own home outright with savings (over 100k) She’s today received a letter from HMRC saying they are aware she has a second home which she rents out and asking loads of questions about when she bought it, how much it was and where she got the money from and how much rent she gets and she’s in a right panic about it. I haven’t seen the letter myself, I’m going to go round tomorrow and have a look.

Has she done anything wrong here? Is she likely to be fined or penalised?

Just to add, there is ground rent of £100 a year on the house which she pays and £400 a year service charges which we pay. We also meet the cost of any repairs needed and pay the council tax and all the utilities which are in our names. We don’t have a tenancy agreement or any legal agreement as we didn't think it was necessary as no money exchanges hands but she does pay for landlord insurance.

No my friend lives rent free in her mum's second home. So long as all bills are paid and you've been paying council tax your fine. Obviously not claiming benefits and rent element etc

SexAndCakes · 21/01/2025 19:45

I think your interpretation is correct that the situation just needs clarifying to HMRC. The only other issue I can see is her being in receipt of benefits with undeclared assets, but I don't know what attendance allowance is so could be completely wrong about the latter.

I also think you should have a legal agreement drawn up regardless of the lack of monies changing hands. It would protect you all if anything unexpected happens.

tigger1001 · 21/01/2025 19:46

Hmrc will have got the info from the land registry that she owns two properties. She will be able to prove that she doesn't receive rent (ie nothing going into her bank etc) so just provide that info to Hmrc

She hasn't done anything wrong. Hmrc olay the assumption game - ie if 2 houses then one will be rented out. Will be true a lot of the time, but not in this case

Original poster
DollyPumpkin · 21/01/2025 19:46

Thanks everyone. No we don’t claim any benefits, both work full time and pay all the bills and council tax which are all in our names. Will HMRC just accept that she doesn’t charge us any rent? She’s really worried that she’s done something wrong (you know what older people are like for worrying) do we need to seek any legal advice etc?

OP posts:
Original poster
DollyPumpkin · 21/01/2025 19:48

SexAndCakes · 21/01/2025 19:45

I think your interpretation is correct that the situation just needs clarifying to HMRC. The only other issue I can see is her being in receipt of benefits with undeclared assets, but I don't know what attendance allowance is so could be completely wrong about the latter.

I also think you should have a legal agreement drawn up regardless of the lack of monies changing hands. It would protect you all if anything unexpected happens.

Attendance allowance isn’t means tested thankfully

OP posts:
Anothercoffeeafter3 · 21/01/2025 19:50

It just needs explaining to HMRC it's likely the total of her private pension, state pension, spouse pension etc is close or over the tax limit. As she isn't declaring an income from rent they will be looking to see she isn't avoiding tax

creamsnugjumper · 21/01/2025 19:52

Sounds like someone has reported this.

But you have nothing to worry about at all. It would be better if the house had been gifted to you.

Cottagecheeseisnotcheese · 21/01/2025 19:53

also if your mother needed to go into care the value of both homes maybe needed to pay for it which could mean you being homeless, depends on the value of the houses but as they are both hers they are assets that would count, depending on your Mum's health and whther you have iblings to inherit it is debatable whether it is advantageous for her to transfer to your name or whether you and your prtner could buy it off her, however for deprivation of assets claim later there maybe a risk if you pay well under market value. Ther eis nothing to worry about via HMRC as no tax due but when and if it is sol there maybe capital gains. I would suggest your mum looks into the financial implications long term and also makes a will

SatsumaCat · 21/01/2025 19:57

No you don't need legal advice. Just explain the situation to HMRC if they want to investigate further they will request further evidence like bank statements perhaps but you haven't done anything wrong so there will be no evidence that you have. A solicitor is not going to advise you to do anything other than provide whatever information HMRC ask you to provide and would be a complete waste of money. You should look into the potential future impact of care home fees / potential inheritance tax on you though given your DM owns your home and hasn't signed it over to you - it could be sensible for her to do so.

butterfly0404 · 21/01/2025 19:57

You haven't got anything to worry about , as long as no income was derived from the second home. I think this would be treated as a gift when she passes as long as it was made 7 years before.

Your mum sounds like a wonderful person to do this for you.

neilyoungismyhero · 21/01/2025 19:58

mashingwachine · 21/01/2025 19:38

Is this to do with pension credit? She would be entitled to some with the AA?

She has a 100k in savings!

SatsumaCat · 21/01/2025 19:59

butterfly0404 · 21/01/2025 19:57

You haven't got anything to worry about , as long as no income was derived from the second home. I think this would be treated as a gift when she passes as long as it was made 7 years before.

Your mum sounds like a wonderful person to do this for you.

It was not a gift as the DM owns the second home, so would still be part of her estate for inheritance tax.

spannasaurus · 21/01/2025 19:59

butterfly0404 · 21/01/2025 19:57

You haven't got anything to worry about , as long as no income was derived from the second home. I think this would be treated as a gift when she passes as long as it was made 7 years before.

Your mum sounds like a wonderful person to do this for you.

It's not been gifted it's still owned by OPs mum

DragonFly98 · 21/01/2025 20:04

neilyoungismyhero · 21/01/2025 19:58

She has a 100k in savings!

Show quote history

She could be entitled to savings credit.

Badbadbunny · 21/01/2025 20:04

creamsnugjumper · 21/01/2025 19:52

Sounds like someone has reported this.

But you have nothing to worry about at all. It would be better if the house had been gifted to you.

No it doesn't. HMRC check Land Registry records, council tax records, voters records, etc., so they've just done some very simple cross checking, and found that she owns a property where she doesn't live, so the "assumption" has to be that she's renting it out, hence them wondering why no rent declared. As said by other posters, a simple confirmation letter from her to HMRC to tell them the situation will put the matter to bed. Although of course, in the fullness of time, they'll expect to see a capital gains tax return and payment of capital gains tax when the property is eventually sold or transferred as it won't be exempt from CGT as it's not her main residence. So if anything, that's more what you/her need to plan for and deal with when the time comes.

Puppymom · 21/01/2025 20:08

Sorry I’m a bit confused apologies. So mum lives with you and rents out her original house? Is that correct? Is she doing a self assessment to declare her rental income? Essentially one home will be primary home and one a rental business. She needs to be clear about which as the business one would be liable to more taxes. I hope I got it right and understoood the original question x

MyNewLife2025 · 21/01/2025 20:09

DollyPumpkin · 21/01/2025 19:46

Thanks everyone. No we don’t claim any benefits, both work full time and pay all the bills and council tax which are all in our names. Will HMRC just accept that she doesn’t charge us any rent? She’s really worried that she’s done something wrong (you know what older people are like for worrying) do we need to seek any legal advice etc?

It would be very easy to check she doesn’t receive any rent by looking at her bank statements.
Inreally dintbthink she needs to worry

Original poster
DollyPumpkin · 21/01/2025 20:11

Thank you everyone you’ve really put our minds at rest. I do have one older brother and he’s done very well for himself in life and didn’t mind our mum doing this for me at all. She has a will and everything is shared equally between us both. I think we were thinking that when the time comes and she passes away then we will just buy my brother out of his share of our house with any money left in her will. It’s all very complicated and I don’t like to think of her not being here anymore. She’s is a wonderful woman who hasn’t had the easiest life and she’s my best friend, I can never thank her enough for what she did for us.

OP posts:
Original poster
DollyPumpkin · 21/01/2025 20:12

Puppymom · 21/01/2025 20:08

Sorry I’m a bit confused apologies. So mum lives with you and rents out her original house? Is that correct? Is she doing a self assessment to declare her rental income? Essentially one home will be primary home and one a rental business. She needs to be clear about which as the business one would be liable to more taxes. I hope I got it right and understoood the original question x

No she lives in her own house and she owns our house which we live in rent free so there is no income to tax as we don’t pay her anything. Hope that makes more sense

OP posts:
GrannyAchingsShepherdsHut · 21/01/2025 20:14

HMRC have always been really helpful whenever I've had a problem or question. It can take ages to get through but I'd suggest she gives them a ring - with you there so if she gets overwhelmed or worried you can take over - and just explain what the situation is.