Notional income on properties

[BigLes]

Hi All,

Anyone know what the rules are around assets, properties and notional income? The information that exists seems very (deliberately?) vague.

If I buy a second property and stay in that property 3 nights a week in order to be close to my child to facilitate overnights etc, does that property become an “asset” and will I be charged 8% of its value year-on-year?

The new property would be bought for the sole purpose of making child arrangements work and it is only barely affordable. Being forced to pay a notional income charge on it would mean it becomes unaffordable and hence I wouldn’t be able to have a home close to my child. The new property would be paid for using some limited savings accrued since my child was born (i.e. the deposit) plus a mortgage which would be repaid using my earnings. A percentage will already be being deducted from these earnings and sent to my child’s mother as maintenance. If I were also obliged to pay an additional 8% on this new home then I’d effectively be paying maintenance twice on the same income. Would this mean I’m not liable to pay again? Or is it just a blurry fuzzy subjective decision made by CMS and hence a risk from my perspective?

I would sell both properties after around 4 years in any case to buy one single property.

My original property was bought before my child was born but would be classed as my main residence (and hence I understand would not be classed as an asset on which notional income is payable).

Thanks

 

[BigLes]

I’ve since found out elsewhere that it’s the equity in a home that is assessed for notional income (seems obvious now I think about it!). So, as long as my first home remains my primary residence then any second home wouldn’t result in additional liability.
Obviously this would change if I received rental income for one of the properties (which I don’t intend on doing).

 

[StayStrong]

Ok, after my reply elsewhere to you I didn't get chance to confirm on your question re equity quotient. That's correct, only the value of the asset is assessed as notional income, not (in the case of property) the actual value.

However:if that 2nd property has an equity worth more than £31250 either now or in the future it can be assessed at 8% pa payable (gross of £31250 value). So equity = £41250 means £800 pa in CMS payable pa along with income related monthly cms payments.

You are wrong about primary residence and 2nd home as stated above.

Rental income has a bearing, but not as you describe. In that instance it is equity above £31250 plus 8% of rental income earnt in addition, pa.

Of course, unless the other side make a claim you are not liable to disclose to them or CMS what you choose to do financially.

HTH, SS.

 

[BigLes]

Ok, after my reply elsewhere to you I didn't get chance to confirm on your question re equity quotient. That's correct, only the value of the asset is assessed as notional income, not (in the case of property) the actual value.

However:if that 2nd property has an equity worth more than £31250 either now or in the future it can be assessed at 8% pa payable (gross of £31250 value). So equity = £41250 means £800 pa in CMS payable pa along with income related monthly cms payments.

You are wrong about primary residence and 2nd home as stated above.

Rental income has a bearing, but not as you describe. In that instance it is equity above £31250 plus 8% of rental income earnt in addition, pa.

Of course, unless the other side make a claim you are not liable to disclose to them or CMS what you choose to do financially.

HTH, SS.

Thanks. Yeah I don’t anticipate I’ll cross the threshold of £31250 in terms of equity, on the 2nd home I mean. I’d be selling it in 3 or 4 years’ time before I reach that point. Thanks for clarifying though.

Out of interest, rental income is declared to HMRC so is the rental income not just added to salary to give a total annual income? And then the RP receives 18% (or whatever) of that total amount? From your answer above it sounds like 8% of the asset goes direct to the RP (this would seem incredibly unfair).

Whilst I’m on this topic, if I were bequeathed a share of my parent’s home (shared with my siblings) then, when my parents pass away, and presuming that share is >£31250, I will be liable to pay the notional income on it (presuming that the RP notifies CMS of my inheritance). Just thinking out loud here, it would be wise of me to avoid this scenario by: selling the home > overpaying the mortgage on my main home with some proceeds and/or putting proceeds in a savings account and an ISA whilst making sure that the savings account and ISA don’t each exceed £31250.