Rental Income

[disillusioned_brit]

Hi All,

I have a question which I’m hoping you guys can answer.

We’ve decided (after all the amazing advise we got from here) to go down the fiancée route to have my partner return to the UK.

I have a property portfolio but am confused about a few things;

1. When it says ‘gross rental income’ can be used, does this merely mean before agent fees/ground rent/Maintanence, or does it also mean before mortgage payments?

For example, rental figure is £100 per month, with mortgage payment of £30. Does the figure of £100 get used to achieve the threshold or the £70?

2. I report on these properties at the end of Jan as a self employed person, but the home office want last 12 months, which would mean I haven’t declared this period to HMRC yet, only the period from April 17-April 18!

How do I prove I’ve paid tax on this income, or in my case will do next January?

3. What documents are required to prove rental income and that I own the properties? Bank statements, tenancy agreements etc?

Your help is greatly appreciated, as always.

[seagul]

I don't think you can use rental income on mortgage property to meet the financial requirement.

[disillusioned_brit]

I don't think you can use rental income on mortgage property to meet the financial requirement.

Thanks Seagul.

Are you sure?

That would mean a lot of buy to let investors/investments can’t be used.

[bobbyboat]

I don't think you can use rental income on mortgage property to meet the financial requirement.

Huh? I don't believe this is correct at all. That would mean very few people (only those who are mortgage-free) could use rental income!

I have a property portfolio but am confused about a few things;

I'm not expert on this matter, but am looking to use rental income myself so I have read up on it.

1. When it says ‘gross rental income’ can be used, does this merely mean before agent fees/ground rent/Maintanence, or does it also mean before mortgage payments?

For example, rental figure is £100 per month, with mortgage payment of £30. Does the figure of £100 get used to achieve the threshold or the £70?

It says 'gross rental income' so I believe it is the amount you receive in your bank account as income, i.e. after any agent fees. I do not believe mortgage payments or other costs come into it at all, as that would not be 'gross rental income'. So in your example it would be £100, assuming this is the amount you receive (e.g. tenant's pay £110 and agent takes £10).

3. What documents are required to prove rental income and that I own the properties? Bank statements, tenancy agreements etc?

(a) To evidence property rental income:
(i) Confirmation that the person or the person and their partner jointly own the property
for which the rental income is received, through:
(1) A copy of the title deeds of the property or of the title register from the Land Registry
(or overseas equivalent); or
(2) A mortgage statement.
(ii) Personal bank statements for or from the 12-month period prior to the date of
application showing the rental income relied upon was paid into an account in the name
of the person or of the person and their partner jointly. The bank statements should
cover the period for which the income is relied upon.
(iii) A rental agreement or contract.

Again, I'm no expert so perhaps someone else will be able to help you too. Good luck!

[seagul]

20(c) Any rental income from property, in the UK or overseas, must be from a property that is:
(i) owned by the person;
(ii) not their main residence and will not be so if the application is granted, except in the circumstances specified in paragraph 20(e); and
(iii) if ownership of the property is shared with a third party, only income received from their share of the property can be counted.
(cc) The amount of rental income from property received before any management fee was deducted may be counted.
(d) Equity in a property cannot be used to meet the financial requirement.
(e) Where the applicant and their partner are resident outside the UK at the date of application, rental income from a property in the UK that will become their main residence if the application is granted may only be counted under paragraph 13(c)(i) and paragraph 13(d)(ii).

[disillusioned_brit]

I don't think you can use rental income on mortgage property to meet the financial requirement.

Huh? I don't believe this is correct at all. That would mean very few people (only those who are mortgage-free) could use rental income!

I have a property portfolio but am confused about a few things;

I'm not expert on this matter, but am looking to use rental income myself so I have read up on it.

1. When it says ‘gross rental income’ can be used, does this merely mean before agent fees/ground rent/Maintanence, or does it also mean before mortgage payments?

For example, rental figure is £100 per month, with mortgage payment of £30. Does the figure of £100 get used to achieve the threshold or the £70?

It says 'gross rental income' so I believe it is the amount you receive in your bank account as income, i.e. after any agent fees. I do not believe mortgage payments or other costs come into it at all, as that would not be 'gross rental income'. So in your example it would be £100, assuming this is the amount you receive (e.g. tenant's pay £110 and agent takes £10).

3. What documents are required to prove rental income and that I own the properties? Bank statements, tenancy agreements etc?

(a) To evidence property rental income:
(i) Confirmation that the person or the person and their partner jointly own the property
for which the rental income is received, through:
(1) A copy of the title deeds of the property or of the title register from the Land Registry
(or overseas equivalent); or
(2) A mortgage statement.
(ii) Personal bank statements for or from the 12-month period prior to the date of
application showing the rental income relied upon was paid into an account in the name
of the person or of the person and their partner jointly. The bank statements should
cover the period for which the income is relied upon.
(iii) A rental agreement or contract.

Again, I'm no expert so perhaps someone else will be able to help you too. Good luck!

Thank you for replying.

I’ve read the same but the confusing/missing bit is where the guidance mentions management fees and the income should be gross (so before such fees are taken off), yet no mention of mortgage/finance payments being deducted or not!

I manage my own properties so in the example I quoted the rent I receive is the £100, and all costs (finance etc) are deducted from this. The £100 is the gross figure, before all taxes.

Aside from this however it leaves the question of declaring to HMRC. In my case we’ll be making an application in next month or so, so the 12 months of rental that I’ll be using won’t be covering the same period as I’ve submitted to HMRC, infact I won’t submit any of thee figures till January 2020!! Won’t this be an issue for them to see tax paid etc?

[bobbyboat]

Thank you for replying.

I’ve read the same but the confusing/missing bit is where the guidance mentions management fees and the income should be gross (so before such fees are taken off), yet no mention of mortgage/finance payments being deducted or not!

I manage my own properties so in the example I quoted the rent I receive is the £100, and all costs (finance etc) are deducted from this. The £100 is the gross figure, before all taxes.

Aside from this however it leaves the question of declaring to HMRC. In my case we’ll be making an application in next month or so, so the 12 months of rental that I’ll be using won’t be covering the same period as I’ve submitted to HMRC, infact I won’t submit any of thee figures till January 2020!! Won’t this be an issue for them to see tax paid etc?

You don't need to show that you've paid your tax on rental income, as far as I'm aware. It's not their business is it? That's between you and HMRC. Of course you need to show your bank statements and all the other evidence. If you're worried about that then mention it in a cover letter.

I know you think it logical that your mortgage payments should be deducted, but I've seen no evidence that it's needed. It should be a consideration but the whole income based system is stupid in my opinion. Consider this:

Person X earns £17,000 but lives in a CASTLE and is mortgage-free, with few monthly outgoings.
Person Y earns £20,000 but has a huge mortgage and other high monthly outgoings.

No visa for the spouse of Mr X, but no problem for Mr Y.

Of course, I am new to this game so if in doubt, ask an expert.

[bobbyboat]

My castle analogy was not the best... as I'm sure a castle has considerable monthly outgoings! But my point still stands.

[disillusioned_brit]

My castle analogy was not the best... as I'm sure a castle has considerable monthly outgoings! But my point still stands.

I completely agree with you, and it is daft, pretty much the whole system has its flaws, but we’ve got to be able to comply!!

Apparently the best way to see this is by them having to tick boxes. If the relevant box, has everything they need (evidence, explanation etc) it gets a tick, and once all of them are ticked, you get a visa!

When I posted something else a few weeks ago, someone mentioned that compassion (and I suppose common sense to you and I!), don’t mix with home office rules.

If it is as you say and it’s gross then it will be a breeze but if not (I’ve been sat on lenders standard variable rate for a few months) it will just knock me under the threshold of £18,600, and I would need to evidence some other income.

Hopefully we can both get a bit of guidance from someone else whose maybe more involved in all of this.