rental income or not?

stuartperry

hey guys good evening! okay so my current situation is I am in a council house one bedroom apartment, and I'm also getting ESA support group income based. The opportunity has risen that I am able to buy my Council flat. Which is quite exciting if my benefits can cover a small mortgage.

it would enable me to get on the property ladder.

my question is if I put this property on Rent, received rent. which is then used to pay the mortgage. Would this affect my benefit?

cheers thanks

poppy123456

If you lived in the property (difficult with only 1 bedroom) and had a lodger then only £20/week of rental income is ignored for Income Related ESA. For every £1 over that amount your ESA will reduce £1 for £1, if it doesn't include a meal. For example, if you charged £40/week then your ESA will reduce by £20/week.

If it includes at least 1 meal a day then only 50% of the income over £20/week will be counted for ESA, for example… if you charge £40/week then £30 will be ignored and your ESA will reduce by £10/week.

If you're claiming single person discount for council tax then you will lose that.

If you didn't live in the property and there's capital in it of more than £16,000 then entitlement to all means tested benefits will end.

stuartperry

i'm thinking of moving out and putting it on rent. if I do purchase the property. The property is worth more than 16,000. The annual rental income will be something like 6000. so what you're saying, I wouldn't qualify for ESA?

What if I decided to stay in the property and own it? Would that affect my benefit?

poppy123456

If you moved out then all of your means tested benefits, including your Income Related ESA would stop because your capital would be more than £16,000. This would make the rental income irrelevant because you wouldn't be claiming any means tested benefits anyway.

Also another thing to think about, it's not a simple or straight forward process being a landlord. What would happen if the tenants didn't pay their rent, how would you pay the mortgage? If something went wrong and repairs are needed, would you be able to afford those?

Not forgetting all the extra costs involved of being a landlord to start with. You will also need a buy to let mortgage. There's lots of information here.

The property you live in is disregarded from all means tested benefits.

If you live in the property have you also though about any repairs that you would need to do if you owned it? Renting a property, especially if you claim for help with that rent is completely different to owning it. Yes, of course it would be nice to own a property but that's not cheap these days.

There's lots of information on being a LL here. https://www.which.co.uk/money/mortgages-and-property/buy-to-let/becoming-a-landlord-aLhwZ0X5DOFU

stuartperry

so is it possible to change my benefit to contribute based?

poppy123456

No, not if all of your ESA is Income Related.

stuartperry

thank you for your response Poppy! It's a shame, would they be the alternative method in my situation?

poppy123456

You're welcome. No, not if you're not planning on living in the property. It would always be treated as capital for all means tested benefits.