Advance rent payments?

If you use cash accounting, you declare it when it’s received.

Some agents will hold the money and transfer it to you monthly.

I’d never accept 12 months rent upfront.

Reply to the comment left by C-cider at 13/10/2023 – 10:32Why not?
I accepted a tenant who got a settlement from divorce proceedings and wanted to pay a year up front, she did then ending up staying for 6year, paying monthly afterwards. Great tenant sad she’s gone.
You would declare the money when received so the entire lump this tax year.

Reply to the comment left by C-cider at 13/10/2023 – 10:32
Agree, hmrc will tax the whole amount if received at once. Unless an agent can pay you a monthly income.

Can I ask why you don’t accept 12 months upfront?

Not a loaded question, genuine.

My only experience turned into a nightmare. The tenant turned unstable, harrassing and sectioned.

Is 12 advance a warning sign for you? or is it the tax?

I think if anyone can pay you 12 months in advance – take it. Its great. With the rate at which money is devaluing and inflating away I can guarantee what you can buy now/ today with that is way more than what you’ll be able to buy this time next year. If you’ve had the cash, whats the problem with paying the tax on it?

Its not so much about the 12 months payment itself but about their ability to pay after it. Landlords get seduced by applicants who fall short in affordability calculations or who have CCJs, and offer large up front payments.

Not necessarily the case, but rogue tenants who want to use a property for a cannabis grow like to pay the rent up front to discourage any visits from the landlord. Meanwhile, ceilings have huge holes for ventilation and hydroponics systems, electricity meter is bypassed and the house if left like a Columbian shack.
12 months rent up front would ring very loud alarm bells for me.

given the state of most people finances, I am afraid I too would be suspicious of 12 months up front….
Like anything in this game its a judgement call.

If you reply back and say no as you prefer the way you are happy with then that will make no difference to the genuine applicant (they could afford to put aside and get more interest on it over the 12 months), yet the non genuine one will shy away as they will know it means you have more possession rights and not focussing on the money.

Just as we suss out tenants, I think there are many rouge tenants that try to figure out the LL. Ones that take the money first, perhaps seen as only money orientated??? Makes you think

I have a tenant who has been paying 12m upfront for 7 years with no problem. It is paid around 20 April each year and included in the relevant tax return relating to that year.

If the agent holds it and transfers it to you monthly it is considered to be a deposit.

If you accept the whole 12 months worth then you have a 12 month tenancy which means 12 months notice.

Actually, I’m not sure it would be regarded as a deposit if it were clear which months the advance was intended for. However, I’m not sure how it would be regarded by a court, so I won’t comment further on this.

There is a risk that 12 months advance rent would create a tenancy with a period of 12 months rather than 1 month, although there are ways around this. However, if it were a 12 month period tenancy, the notice period is capped at 6 months.