Terms & Conditions

[Anonymous]

Major mental blocks throughout office here ! Can anyone settle our debate.

Clamant owns a property which is rented out and does not fall into one of the disregarded as capital categories.

Am i right in thinking the below needs to be my course of action.

1) Obtain a valuation where the valuation office will take into account sitting tenants and give appropriate valuation.

2) Take into account this valuation only.

3) take into account this valuation but also calculate capital from the rental income received.

4) Anything else ?

Any help, advice etc would be greatly appreciated.

Thanks

[Anonymous]

Easier than that, I think. Don’t bother with Step 3. Rent income treated as capital is just a legalistic way of saying that it doesn’t count as income.

To the extent that the claimant ever has any rent money in his hand, it is capital for that fleeting moment. When it’s gone, it’s gone. If it’s saved, it’s saved. There’s no need to add up rent payments and work out how much capital a year they come to

Because rent income is treated as capital immediately, and never as income, you don’t need to worry about over-estimating the balance in a current account – it’s not necessary to measure the balance at the low point of the monthly cycle: a snapshot will do.

Only thing you do need to keep in mind with the valuation is that the 10% for disposal costs comes off [b:29bbb6f9a1]before[/b:29bbb6f9a1] the mortgage (if there is one). If the valuer has given you a figure net of mortgage, it would be wrong to deduct only 10% of that, because the agents and solicitor won’t reduce their fees.

[Anonymous]

Many thanks for that Peter. It was very helpful.

[jgwizdak]

So he’s not running it as a self-emplyed business then.

[Anonymous]

No he is not running it as a self employed business.

[Darren W]

Can I ask someone to clarify something for me please. I understand that is the property is not disregarded for capital, we treat income less and costs as capital. Do we also take in to account the capital value of the property. For example

Property is worth £200000
Mortgage on property is £160000 (paying £5400 p.a)
Rental income is £6500 p.a.
No other costs

Do we take value of property less 10% less mortgage = £20000 as well as the capital figure for the rent, or just the rental figure?

[Anonymous]

Correct steps:

1. Take 10% off the full value – 200,000 less 10% = 180,000

2. Deduct mortgage – 180,000 less 160,000 = 20,000

In this case, that’s it: capital exceeds the limit.

Had the value after step 2 been less than £16,000, you would have added that to any other capital in the claimant’s possession, which may or may not include some recent rent income: it’s a simple question of how much money the claimant has got today. Annualised rent income is not money the claimant has today.

[Author]

Posts