MSE News: Call to up tax-free lodger allowance

[MSE Guy]

This is the discussion thread for the following MSE News Story:

"The Government is being urged to increase the tax-free allowance given to people who rent a room to a lodger as it has remained static for over a decade ..."

Read the full story:
Call to up tax-free lodger allowance

[Andy Davies]

Why would be my question...

I'd rather they scrapped the allowance raised the tax free allowance for everyone instead.

Andy

[Jowo]

The tax free sum for the landlord is equivalent to a rent of about £82 per week or £354 per calendar which probably doesn't cover 90% of rental rates for lodgers in the south east.

As there's a housing shortage due to a significant population increase, you would have thought the government might be incentivised for more householders to take in lodgers.

However, its probably a fiddle for someone to do the tax return for a sum greater than that and that kind of bureaucracy is off putting to the average person.

Perhaps it should just be scrapped for being so fiddly to monitor and manage, and absorbed, as Andy Davies says, into some existing allowance?

[Chrismaths]

It's not designed to be a tax free wheeze for encouraging lodgers - if you claim it you are also excluded from claiming back expenses related to the letting. It's therefore designed to avoid people having to fill in tax returns when they make a small amount of money from letting a room, making expense for both them and HMRC.

What's the point of increasing it?

Full details here: http://www.direct.gov.uk/en/MoneyTax...ome/DG_4017804

[tbs624]

The organisers of the campaign want that tax-free allowance upped to £9000 per annum, apparently. Their argument is that it would help prevent repossessions: that's assuming that all those who take in a lodger are struggling with day to day finances.What equivalent subsidy would be available for those don't have the space to take in a lodger?

Let's up everyone's tax free personal allowance to that figure instead.

On Jowo's point, extra lodger capacity is not going to solve a housing shortage - it may help a few singletons but families need affordable long term housing, not a bedroom with little security of tenure..

Even if the campaign is not successful ( and it won't be) it will no doubt generate a boost in business for a particular website

[Jowo]

Originally Posted by tbs624

On Jowo's point, extra lodger capacity is not going to solve a housing shortage - it may help a few singletons but families need affordable long term housing, not a bedroom with little security of tenure..

There are almost a million lodgers in the UK, according to this estimate, across around approx 25 million existing households.

Lodging is clearly the preserve of the young and those on lower incomes but nonetheless, it still accommodates a fair few.

http://www.telegraph.co.uk/finance/p...recession.html

From this article, it appears its popularity is motivated by the stretched finances of the house-owner, increasing by 20+ % over the last few years, Therefore, it actually doesn't look like the low tax threshold is putting many off.

http://www.net-lettings.co.uk/London...sing-1289.html

[edgex]

Originally Posted by Jowo

The tax free sum for the landlord is equivalent to a rent of about £82 per week or £354 per calendar which probably doesn't cover 90% of rental rates for lodgers in the south east.

As there's a housing shortage due to a significant population increase, you would have thought the government might be incentivised for more householders to take in lodgers.

However, its probably a fiddle for someone to do the tax return for a sum greater than that and that kind of bureaucracy is off putting to the average person.

Perhaps it should just be scrapped for being so fiddly to monitor and manage, and absorbed, as Andy Davies says, into some existing allowance?

surely people could only take in a lodger if theyve actually got a room which is suitable to have a lodger in?


& is there really a housing shortage?
or is it down to the right mix of housing not being readily available at decent prices?



which would be better:
an elderly woman in a 3/4 bed house with a lodger, whilst a family with 2 kids are cramped into a 2bed house
or
that woman moving into the 2bed house, & the family occupying the 3/4bed house

she could still have a lodger in the 2bed, if wanted, & that would be 100% efficient usage of the bedrooms

[Jowo]

If a million people are effectively renting a room in a property rather than finding self-contained property, then there are a million less new households to worry about constructing, that's the point I'm making.

There is a signficant increase in population growth and new households (caused by immigration, divorce, people living longer, more people living alone, etc) so its just as well some of this spurt is being accommodated by people with a spare room who ordinarily would have left them empty.

Any campaign putting pressure on the government to increase the tax free limit for lodgers could easily gain headlines if they reminded the govt what would happen if a million landlords were encouraged to serve notice on a million lodgers on the same day and the million lodgers then presented themselves to their local authority housing department as homeless.

Of course, this level of social activism is unlikely to happen but it would make a great symbolic gesture.

[seven-day-weekend]

Originally Posted by tbs624

The organisers of the campaign want that tax-free allowance upped to £9000 per annum, apparently. Their argument is that it would help prevent repossessions: that's assuming that all those who take in a lodger are struggling with day to day finances.What equivalent subsidy would be available for those don't have the space to take in a lodger?

Let's up everyone's tax free personal allowance to that figure instead.

On Jowo's point, extra lodger capacity is not going to solve a housing shortage - it may help a few singletons but families need affordable long term housing, not a bedroom with little security of tenure..

Even if the campaign is not successful ( and it won't be) it will no doubt generate a boost in business for a particular website

It will help a great many single people on low income who have no choice but to have a room in someone else's house because they can't afford to live any other way as they have only their one wage and no help from the Government like families do.

I think the lodger allowance should be raised to encourage more people to have lodgers.

[tbs624]

Originally Posted by seven-day-weekend

It will help a great many single people on low income who have no choice but to have a room in someone else's house because they can't afford to live any other way as they have only their one wage and no help from the Government like families do.

I think the lodger allowance should be raised to encourage more people to have lodgers.

(my highlighting) See my previous comment

Originally Posted by tbs624

Let's up everyone's tax free personal allowance to that figure instead.

That would help single people

An increase in the rent a room tax allowance would obviously also help a "great many people" who have bought beyond their means and live in larger properties than they need to: LLs ( whether of tenanted properties or those letting out space in their own home) don't let to others out of altruism, as a public service to the potentially homeless, they do it for their own financial gain Why should only those who have space for lodgers be given a larger tax free allowance?

[puddings]

Im glad MSE are supporting this campaign.

People that have plenty of money probably wouldn't choose to share their home even if they did have the room. It's people that are skint, like me that do it.

Without my lodgers I would have been reposessed by now. The scheme for tax free income should continue to be encouraged, household bills have shot up loads in the last 12 years, surely its time that the Inland Revenue adjusted the threshold to put the scheme back into the same perspective that it was when first set up.

Write to your MP!

http://spareroom.co.uk/el/69181531/7a809907bba61ba4/rtr

[puddings]

Originally Posted by edgex

which would be better:
an elderly woman in a 3/4 bed house with a lodger, whilst a family with 2 kids are cramped into a 2bed house
or
that woman moving into the 2bed house, & the family occupying the 3/4bed house

The elderly woman is unlikely to want to move house whatever happens. So this way she could stay in her house and get two or three lodgers.
Believe me, there is absolutely no shortage of people wanting to lodge. When I get a vacancy and put an advert in our local paper, I could fill that room twenty times over with the response that it generates.

[Debt_Free_Chick]

If upping the allowance is intended to prevent repossessions, then the expenditure should be targeted at those who need help to prevent repossession. Otherwise, it's the "Maggie Thatcher" argument i.e. those that don't need the allowance get it anyway and those that can will abuse the system to get an allowance they don't need!

I am reminded of this .... "The only thing we learn from history is that we don't learn"!

[Debt_Free_Chick]

Originally Posted by puddings

The elderly woman is unlikely to want to move house whatever happens. So this way she could stay in her house and get two or three lodgers.

Yup - and Maggie Thatcher (and others) could live in a twenty bedroomed house and let out one or two just to get the allowance. But is MT in danger of being evicted or repossessed? :confused:

[tbs624]

Originally Posted by puddings

Im glad MSE are supporting this campaign.

MSE is reporting the campaign as a news item and a topic for discussion rather than specifically supporting it AFIAA

Originally Posted by puddings

People that have plenty of money probably wouldn't choose to share their home even if they did have the room. It's people that are skint, like me that do it.

Without my lodgers I would have been reposessed by now. The scheme for tax free income should continue to be encouraged, household bills have shot up loads in the last 12 years, surely its time that the Inland Revenue adjusted the threshold to put the scheme back into the same perspective that it was when first set up.

When you take on lodgers you have the option of whether or not you use the RaR scheme. If your bills are particularly high you may be better accounting for room rental income on your tax return in the standard way

Originally Posted by puddings

Write to your MP!

Also write if you don't agree with the allowance being hiked to 9 grand

[Gorgeous George]

I let a 4-bedroom property for £5,400 per year and have to pay tax on income. If I moved in and let all the rooms to a lodger, I'd pay no tax.

I'd scrap the allowance or let (single property) BTL LLs to opt out of paying tax too.

GG