I have received a letter from HMRC saying I may owe rental income. I have a buy-to-let (BTL) mortgage on a property I let my daughter live in rent-free; she pays me £100 per month to cover insurance. The BTL was originally set up on a private tenant, but they left the property and we moved our daughter in. We never got round to changing the BTL mortgage but aimed to once the term was complete. What are the tax implications? 

Arthur Weller replies:  

Even though the £100 per month received from your daughter is to cover the insurances, it is still rental income (see HMRC’s Property Income Manual at PIM1051). However, if it just covers the insurances, you have made no profit from this rental business, so there is no income tax liability. Assuming you have no other rental income, you do not need to declare this rental income, because you are making no profit, and it is below the £2,500/£10,000 HMRC reporting thresholds.