Terms & Conditions

[musd]

If the value of a property is to be taken into account as capital because it is not disregarded and the propety is rented out, do you take the rental income into account as well?

Any clarification appreciated.

[Anonymous]

Yes, but as capital.

Value the property as usual. Then you need to work out the ‘profit’ from renting out the property – how much rent has been received in the period from the start of the rental and the date of claim, less the mortgage payments in the same period. If this calculation gives a positive figure, add this to the capital value of the property. If it gives a negative value, deduct the amount from the capital value of the property.

(Reg 46(4) to the HBR 2006, I think.)

[andyrichards]

If the property is being treated as capital then any rental income similarly counts as capital, unless the claimant or partner is over 60.

In calculating the amount of capital you disregard the outgoings associated with letting the property – agents’ fees, income tax due on the rental income, council tax, water charges, mortgage repayments.

[musd]

Thanks for the quick response.

[Anonymous]

I wouldn’t even bother doing that.

First, we are agreed that the money doesn’t count as income, like building society interest doesn’t count as income.

Instead, the full amount of rent income counts as capital the instant it is received, like building society interest, but only for as long as you still have the money, also like building society interest. I don’t think it is necessary to work out how much rent “profit” has been made: if they’ve still got the money it will be visible in their declared bank accounts etc. If they haven’t, it won’t.

One obvious reason why they might not still have a large portion of the rent income is that they have had to use it for outgoings like mortgage payments. But those details don’t matter – any remaining saved capital is just part of their generic stash, which will be apparent from the bank statement/pass book or whatever.

[Author]

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