Renting out your home whilst living in quarters
If you own a house but are living in military accommodation and renting out the house you bought, there are a few things you should know…
Firstly, your military house falls under the ‘Job Related Accommodation’ (JRA) rule – meaning you don’t have to pay capital gains tax (CGT) on your privately owned property if you decide to sell it. This is because you’d really like to live in the house that you bought, but can’t because you need to be wherever the military has sent you. You need to write to HMRC to tell them that the house is your ‘primary residence’ for tax purposes.
This only applies to ONE privately owned property! If you decide to buy more properties to rent out, then the JRA rule would not apply to those ones and you will be liable to pay CGT on them when you sell.
The JRA rule does cover your spouse – even if they are non-military, so they will not have to pay any CGT on their share of a co-owned property.
Unless your rental income is less than £1000 per annum (that’s £1000 per person receiving this income), then you need to fill in a self-assessment to let HMRC know about it. You should also let the HMRC know what the split will be so they can make sure this is happening when you do the self-assessment (there’s yet another form for this!). There are a few reasons why you would still want to tell HMRC about the income even if it's under £1000 though, so it's your choice.
It is also advisable, but not a legal requirement, to have a ‘Statement of Trust’ drawn up between the people that own the property – this is to make the ownership split legal in case of a dispute further down the line. For married couples, the assumption is 50/50 – but this could be contested if, for example, one person had paid a lot more towards the mortgage than the other. This is a job for a solicitor really - attempting it yourself isn't a great idea.