Renting out a room - tax

charlesworth82

Hi,

I know you can earn roughly 5k a year tax free from renting out rooms in your house.

However, at the moment I do 'host family' to foreign students to help with their English. This means the person pays a set amount each week and included in that is all their bills and food (similar to when a child starts working and pays board).

My quiestion is do i count the full money they give me as 'rent' when doing a tax form - or can i break the costs down e.g. food - 20, elec 5, gas 5 etc...

Any help appreciated.

mlz1413

Do you host through an agency? Could they inform you of the correct process?

I assumed the money you received was purely for costs involved as the sums involved are not that huge, I would ring or visit your local tax office with this specific question.

charlesworth82

Hi Thanks for the reply.

I think after taking food and bills off the amount i dont think i will reach 4k (as it isnt a full year they are here) - nice one, no forms to fill in

thanks again

silvercar

The rent a room scheme looks at gross earnings not net, so any income you receive, for rent, food etc is included within the £4,250 allowed tax free.

From the link in post #2:

The advantages and disadvantages of the scheme
There are advantages and disadvantages of the scheme - it's simply a matter of working out what is best for you.

The principal point to bear in mind is that if you are in the Rent a Room scheme you can't claim any expenses relating to the letting (for example, wear and tear, insurance, repairs, heating and lighting).

To work out whether you will be better off joining the scheme or declaring all of your letting income and claiming expenses on your tax return you need to compare the following:

how much income you are left with after your expenses

the amount of your receipts (rent plus any income from laundry services, meals, etc) over £4,250 or £2,125 if letting jointly (2008-2009 tax year)

If you opt out of the scheme (or simply do nothing) you will pay income tax on the first amount. If you opt into the scheme you will pay tax on the second amount.