Tied Accommodation and Retirement
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Tied Accommodation and Retirement
Carolyn talks to us about how tied accommodation works.
What does it mean to live in tied accommodation? Can you live on work premises?
Tied accommodation tends to apply where the nature of your job means that you need to live where the work is.
You might, for example, be a religious minister who stays in a manse beside a church – that would be deemed tied accommodation. We also see it in boarding schools where house mistresses, for example, live on site. In more rural parts you might find gamekeepers or estate workers who are given accommodation as part of their work package.
In terms of whether you can live on work premises, that’s a bit of a grey area. Depending on the job, you might be given a house that’s a residential property owned by the employer.
Or, if you live in a boarding school, you will be in the accommodation part of that building. Wherever you live, it would have to be deemed suitable for residential occupancy.
What is the accommodation clause in the employment contract?
It really depends on the employer and the type of employment, but there will be terms and conditions around the accommodation that’s provided. Some employers might just give a straightforward tenancy for the property, particularly if the accommodation is separate.
Nearly all will have some clause to say that if you are no longer in employment, then that accommodation would cease to be provided to you. So it’s important if you’re considering a role where there is tied accommodation, that you understand what you can and can’t do in that accommodation and what the terms and conditions are.
Is staff accommodation a taxable benefit? Can I claim tax relief on accommodation?
This is really specific to the employer. To understand fully what your tax position is, I would refer people to either the employer – who should have a clear understanding of how it works – or to speak to an accountant.
Sometimes the accommodation is provided free of charge as part of the package. I don’t think that tends to be taxed, but it’s definitely something to check with an accountant.
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Can you buy the house you live in on the estate where you work?
Most typically, you wouldn’t be able to buy the property, because the residential accommodation is linked to the job. If you retire, for example, or otherwise leave the employment, whoever comes into that role next would be entitled to that accommodation.
That can create problems for somebody who’s been in that role for their whole career. And in some of the roles that we’re talking about, people do tend to stay for many years.
Somebody who’s not got tied accommodation might get a mortgage and buy a property.
They aim to have paid off the mortgage by the end of their working life, to be mortgage-free for retirement.
People with tied accommodation might not be in that position, and face retirement having to find a property to live in. They will have to start paying rent, which can be quite expensive, as if they’ve stopped working, it could be very difficult to get a mortgage.
But there are specific options for people living in tied accommodation to buy a property during their career and rent it out from day one. The aim is to have that mortgage paid off at the point of retirement. Then, when they leave the role that has tied accommodation, they can move into the property they have been renting out.
It’s quite important to consider that if you are in a tied accommodation situation. Where are you going to live in retirement? The earlier that you plan for that, the better.
Can accommodation be deducted from salary?
I believe it can, and there’ll be a nuance as to whether it’s deducted pre-tax or after tax. That’s something your employer should understand in terms of their offering. An accountant, or someone doing the payroll, will be able to explain further.
What happens if my job ends? Will I be evicted? How can I keep my house?
Again, it’s important to understand what the long-term picture is with the accommodation you are in. Because it’s generally tied to the role, when you leave that role through retirement or resigning, it’s likely that you won’t be able to keep the house.
You do need to consider what’s going to happen next in that scenario. The sooner you take advice around that, the better.
How can a mortgage broker help if I’m in tied accommodation?
If somebody is in tied accommodation, it’s quite likely that if they leave that particular job that their next job will have a tied accommodation element. If you are in this kind of career, it’s very useful to speak to somebody like myself, who can give mortgage advice and also financial planning advice.
We can look at how to get you in a position where you not only have retirement income in the form of a pension, but you also have a place to live that’s secure and affordable for you in retirement.
You cannot get advice early enough on this. Sometimes people don’t start thinking about pensions until they’re into their 40s or even 50s – so it’s well worth having a conversation if you’re in this position.
Even if you don’t remain in a job where tied accommodation will feature in your whole career, you’ll still have a large chunk of time where you may not actively be paying off a mortgage and building towards owning that property outright.
All advice is very dependent on individual circumstances, but I would definitely flag to anybody in this situation to have an initial chat and just understand what can and can’t be done.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
Tax treatment varies according to individual circumstances and is subject to change.
Useful Links
- First Time Buyers
- Agreement in Principle
- First Time Buyer Joint Mortgages
- Self Employed Mortgage First Time Buyer
- 5 Percent Deposit Mortgage Scotland
- Shared Ownership Mortgage Scotland
- Joint Borrower Sole Proprietor
- Guarantor Mortgage Scotland
- Gifted Deposit Mortgage
- Offers Over Home Report
- Mortgage Guarantee Scheme Scotland
