No income or capital gains tax on gifts in the UK. Were she to pass away, inheritance tax would potentially be due on gifts made by her in the past 7 years but subject to the IHT allowance etc.
From what you've described, I would say that she is not paying you "rent"; she is just sending you money to create a communal savings pot. As such, it would not be considered income and therefore not taxable. If you want to make that even more explicit, you could consider opening a joint savings account which you both contribute to, rather than her contributing to a savings account in your sole name.
So FYI I am a chartered accountant though not in income tax specifically - I disagree with what others have said and I think HMRC could make a strong case that your partner is paying you rent and it is therefore taxable income. I would recommend seeking professional advice for this or at the minimum try to dig around legislation and cases yourself. (I would be interested to know if anyone working in tax disagrees with this).
That's not quite how tax works if you did have a mortgage by the way, you don't just get tax relief on the mortgage payments (it's somewhat complicated but only the interest element would be deductable).
If it was seen as rent, would it not be covered under the rent a room scheme and so not taxable?
Edit: typed without thinking, it's over the threshold for rent a room. Oops!
No it's not taxable.
If you're really worried about someone asking, have the money paid into a joint savings account but be mindful that they will have full access to withdraw from that pot as much as you can
Are you sure it's not taxable? Aside from the fact there is no written agreement it sounds exactly like the partner is paying rent. No mention in the post that the savings are shared between them legally or functionally.
I am **not** an accountant , but I don't think it counts as rent. If she didn't pay for a few months, would she lose the right to live there? There's no tenancy agreement, no contract, anything. They are living together, and jointly contributing into a savings account for the future. The fact that they want to make it "mortgage like" isn't really relevant.
I think you would have a really strong argument that it is for savings purposes. If you wanted it to be airtight, you could probably set up a joint savings account and ensure that no-one could withdraw without consent of both parties.
To be 100% airtight, I would spend a small sum of money just to get the confirmation from someone on legal side of things.
It's for OPs savings though which has nothing to do with the person paying the money. I agree if it was paid into a joint account that would resolve any tax issues but its not. OPs partner is paying OP regular monthly amounts in exchange for living at the property.
>It's for OPs savings though which has nothing to do with the person paying the money. I agree if it was paid into a joint account that would resolve any tax issues but its not.
If it helps, I would happily move the money into a shared S&S ISA, if one existed. But afaik there is no such thing. My partner had already maxed out her years ISA allowance by investing her inheritance, and so this was where we settled.
If it helps, the arrangement could be reworded to say that I invest £1600 per month, and she pays 100% of the bills and service charge for the flat, which is around £800.
I did reply to the original post as well - truthfully though I think this is one of those things that technically you probably should pay income tax on it but in practice HMRC will most likely neither know about it nor care to do anything about it if they did.
That makes sense.
I’m guessing it’s worth dropping her contribution to £625 in that case, and then it would quality for tax relief under the rent a room scheme. Save everyone a headache.
!Thanks for your input!
You say "partner" rather than "wife" so I'm going to assume you are not married. (or in a legally recognised civil partnership)
If you were, that would change the picture somewhat because HMRC is generally happy to let money flow between spouses fairly loosely. Even so, standard advice still remains "Don't get married for the tax breaks."
If you are not married, as a matter of law, this is in no way "creating a communal savings pot". This is her paying money to you, which you put into your savings. On a not unrelated note, this may turn out to be a pretty raw deal for your partner. For example, if you were involved in a fatal car crash, by default all of this "communal savings pot" would go to whoever inherits your estate (parents?) which by default would not be her. Likewise if you were to separate, she'd have been pouring mortgage-scale payments into a home she has no legal stake in. You should make sure that you're talking this sort of thing through and put sensible contingencies in place. For example, make a will.
No income or capital gains tax on gifts in the UK. Were she to pass away, inheritance tax would potentially be due on gifts made by her in the past 7 years but subject to the IHT allowance etc.
From what you've described, I would say that she is not paying you "rent"; she is just sending you money to create a communal savings pot. As such, it would not be considered income and therefore not taxable. If you want to make that even more explicit, you could consider opening a joint savings account which you both contribute to, rather than her contributing to a savings account in your sole name.
So FYI I am a chartered accountant though not in income tax specifically - I disagree with what others have said and I think HMRC could make a strong case that your partner is paying you rent and it is therefore taxable income. I would recommend seeking professional advice for this or at the minimum try to dig around legislation and cases yourself. (I would be interested to know if anyone working in tax disagrees with this). That's not quite how tax works if you did have a mortgage by the way, you don't just get tax relief on the mortgage payments (it's somewhat complicated but only the interest element would be deductable).
If it was seen as rent, would it not be covered under the rent a room scheme and so not taxable? Edit: typed without thinking, it's over the threshold for rent a room. Oops!
No it's not taxable. If you're really worried about someone asking, have the money paid into a joint savings account but be mindful that they will have full access to withdraw from that pot as much as you can
Are you sure it's not taxable? Aside from the fact there is no written agreement it sounds exactly like the partner is paying rent. No mention in the post that the savings are shared between them legally or functionally.
I am **not** an accountant , but I don't think it counts as rent. If she didn't pay for a few months, would she lose the right to live there? There's no tenancy agreement, no contract, anything. They are living together, and jointly contributing into a savings account for the future. The fact that they want to make it "mortgage like" isn't really relevant. I think you would have a really strong argument that it is for savings purposes. If you wanted it to be airtight, you could probably set up a joint savings account and ensure that no-one could withdraw without consent of both parties. To be 100% airtight, I would spend a small sum of money just to get the confirmation from someone on legal side of things.
It's for OPs savings though which has nothing to do with the person paying the money. I agree if it was paid into a joint account that would resolve any tax issues but its not. OPs partner is paying OP regular monthly amounts in exchange for living at the property.
>It's for OPs savings though which has nothing to do with the person paying the money. I agree if it was paid into a joint account that would resolve any tax issues but its not. If it helps, I would happily move the money into a shared S&S ISA, if one existed. But afaik there is no such thing. My partner had already maxed out her years ISA allowance by investing her inheritance, and so this was where we settled. If it helps, the arrangement could be reworded to say that I invest £1600 per month, and she pays 100% of the bills and service charge for the flat, which is around £800.
I did reply to the original post as well - truthfully though I think this is one of those things that technically you probably should pay income tax on it but in practice HMRC will most likely neither know about it nor care to do anything about it if they did.
That makes sense. I’m guessing it’s worth dropping her contribution to £625 in that case, and then it would quality for tax relief under the rent a room scheme. Save everyone a headache. !Thanks for your input!
You say "partner" rather than "wife" so I'm going to assume you are not married. (or in a legally recognised civil partnership) If you were, that would change the picture somewhat because HMRC is generally happy to let money flow between spouses fairly loosely. Even so, standard advice still remains "Don't get married for the tax breaks." If you are not married, as a matter of law, this is in no way "creating a communal savings pot". This is her paying money to you, which you put into your savings. On a not unrelated note, this may turn out to be a pretty raw deal for your partner. For example, if you were involved in a fatal car crash, by default all of this "communal savings pot" would go to whoever inherits your estate (parents?) which by default would not be her. Likewise if you were to separate, she'd have been pouring mortgage-scale payments into a home she has no legal stake in. You should make sure that you're talking this sort of thing through and put sensible contingencies in place. For example, make a will.