Updating post from Reddit.
I'm letting a property to my mother in law. I am late on filling out a self-assessment for 2023/2024. I wouldn't say I tried to give her a reduced rate but the property has an old back boiler with no thermostat among a few other issues so I gave about what I think is about £100 less rent than other properties in my area at the time. I have not increased the rent since she moved in on Feb 2024. I've now only just learnt that renting to a friend or family at reduced market rates means that I can't carry losses forward. I'd like to go about filling in my self-assesment honestly but also not screw myself over anymore than I have. A few questions:
How would I know if I am letting below market rate? Especially since the valuation would have to be older? How much under the market rate would I have to go before I'm considered letting under market rate by HMRC?
I'm still figuring out my pre-letting expenses but I think I would have about £6000 (utilities, council tax & damp proofing repair) - the property was vacant since 2023. Assuming I am under market rate, would I be waving goodbye to these pre-letting expenses since I wouldn't be able to carry over any loss? It is frustrating that I only letted for 3 months but have to wave goodbye to more than 9 months of pre-letting expenses if so.
Is there anything I can do, or do I just have to chalk it up to experience?
It’s 3) for that one. Your reduced rate excludes you claiming as you state.
You need an accountant. You're not letting go off your expenses. You keep receipts and they come off your capital gains when you decide to sell.
What can be claimed against expense vs capital gains will depend on couple of variables. If you're not sure then get an accountant for this year to get your house in order and then do self assessment from next year
They need to file for last year as well as it was let from Feb 24
If your property is mortgaged then I'd also check with your lender and insurer because you'll find that the common suppliers in the market have a policy that doesn't allow you to rent to family or friends.