Published 20/09/2013 | 05:00
QMy last child has left home and, to be honest, I miss the mammying. My daughter suggested I take in a student (we live near a college) but I'm anxious about the tax situation if I start collecting rent. Would it be complicated and will it affect my pension? I'm 66.
Renting out a room in your house is a great way of supplementing your pension, and I have good news for you: if you receive rental income under €10,000 a year, it's completely tax free under a scheme called rent-a-room relief. You don't have to register as a landlord or provide a rent book, as it's 'digs' rather than renting your home out.
Louise Carey, of Taxconsultant.ie, adds: "The state pension (contributory) is not means-tested; however, the state pension non-contributory is and any rental income would be taken in account for the same. However, you will continue to qualify for the non-contributory pension if your weekly means remain below €245 and the rent-a-room income is not taken into account."
I would strongly suggest, however, that you set down ground rules with your tenant regarding access to the rest of the house, whether they pay rent during the summer, how much it will be, when it will be paid, what food/laundry you will provide and whether visitors can stay over. You will also be concerned with late nights and noise levels. Write these things down and ask your tenant to agree to them in advance.
QI have a 'pension mortgage' which I took out nearly 20 years ago when I was 45. I have five years left on it. Having cut back on my pension contributions due to a downturn in my business, I'm concerned that there may not be enough to clear the mortgage. What should I do?
Pension mortgages made up a small element of the mortgage market 10-20 years ago, primarily for private investors to purchase investment properties tax-efficiently. Interest only is paid on the loan during the term and the intention is that the capital sum borrowed is repaid out of the tax-free cash in their pension plan at maturity. This provides tax relief not only on interest repayments but also on pension contributions (therefore, tax relief is also received on the capital repayments). In addition, the pension fund grows free of tax.
Ciaran Phelan, of the Irish Brokers' Association, says: "In relation to your case, it's up to you rather than the bank to ensure that there'll be enough money in your tax-free cash to repay the loan. Otherwise you'll have to come up with the money some other way. I'd suggest you consult with a broker to see if you'll have a shortfall and then look at the options for dealing with it, either as part of, or separate to, your pension plan."