Rent a room scheme vs declaring rental income

minxystar

Hello all,

I have a weekday tenant moving in today and hopefully another moving in later this week. I have been renting rooms out on and off since 2001, but not to weekday tenants before (I will be providing some laundry and cleaning services for the tenants).

So, I'm not sure if I should continue under the rent a room scheme or declare my rental income seperately? I am very likely to go over the £4250 tax free allowance this year for the first time, but it should be noted I am not working (student nurse) and am unlikely to earn any significant amounts elsewhere.

I have also spent quite a bit on new furnishings, curtains, furniture etc (£500+ to date), so am thinking it would be good to claim these back?

I should also add that I am hoping to have 2 weekday tenants over the summer and then revert to a normal "full time tenant" in September-ish.

I do have tenancy agreements, receipts and the permission of both my mortgage lender and insurance company.

Any advice gratefully received.

Clare

theartfullodger

If you go over the rent-a-room level then tell HMRC. Otherwise they may, when they find out (people tell 'em) decide they don't trust you and take action you don't like (eg they may decide to estimate your income & change your tax code or send you a bill.

Keep records of everything & read up here what allowances you can take off your rental income so you (honestly calculated) declare profit is as low as possible..

Cheers!

Lodger

BitterAndTwisted

I don't think you can offset your expenses against the rental income unless you are registered as a business. Is this your own residence you're letting rooms in or do you live elsewhere??

minxystar

Its my own residence and I am currently living there.

BitterAndTwisted

I'm not sure you actually need a tenancy agreement for a lodger as they have far fewer rights than an actual tenant, but it's fair to set out some basic rules so you both know where you stand.

Have you checked on the HMRC website to check about the status of your expenses? Lodgers are very different to tenants. I suspect that what you see as additional expenses (carpets, curtains, beds etcetera) could be seen as part of your normal possessions when furnishing a home for your own use.

breadlinebetty

You only pay tax over a certain amount of income. Best you contact your local tax office and ask them how much you need to pay towards keeping your local MP living the high life. I'm sure your contribution will just about cover his taxi trips to John Lewis when he goes to pick out some new Siberian goose down feather pillows (£90 each) for his top of the range Relyon bed.:mad:

BitterAndTwisted

Don't be silly! I doubt any PM would actually physically go into John Lewis: they have flunkies for that.

theartfullodger

BandT stated

I don't think you can offset your expenses against the rental income unless you are registered as a business.

Err... rubbish.. see
http://www.hmrc.gov.uk/forms/sa105.pdf (Page 2 boxes 22-27...)
&
http://www.hmrc.gov.uk/worksheets/sa105notes.pdf


SA105 is what all LLs fill in (if they have any sense) every year, particularly if they make a loss..

Cheers!

Lodger

heather_helo

i think you can offset expnses - i am a accountancy student - so bare with me as its my first pos. according to my tax book - you can deduct the rent a room relife 4250 per anumm from the gross rental earnings and be taxed at 20% on the balance of the rent so if you get 5000 the taxable amount would be 750. the aternative is to be self employed - which means you opt out of the rent a room scheeme and can claim expeses that are in addition to the normal running cost - i.e extra ectricity, insurance. decorative items etc you will b able to claim a percentag of capital allowances - i.e probably 25% as it is still your principle private resience. you can allso claim accountancy costs - and i would recomend getting a tax advisor / accountant to do your return as if you gett it worng it culd cost you far more than the accountancy fees.

in principle unless you have large aditional expenditur to offset i would opt for the rent a room scheeme.

theartfullodger

Heather:

£5 to your nominated, registered, charity if you are correct. Which chapter are you on??

Cheers!

Lodger

barnaby-bear

minxystar wrote: »

Hello all,

I have a weekday tenant moving in today and hopefully another moving in later this week. I have been renting rooms out on and off since 2001, but not to weekday tenants before (I will be providing some laundry and cleaning services for the tenants).

So, I'm not sure if I should continue under the rent a room scheme or declare my rental income seperately? I am very likely to go over the £4250 tax free allowance this year for the first time, but it should be noted I am not working (student nurse) and am unlikely to earn any significant amounts elsewhere.

I have also spent quite a bit on new furnishings, curtains, furniture etc (£500+ to date), so am thinking it would be good to claim these back?

I should also add that I am hoping to have 2 weekday tenants over the summer and then revert to a normal "full time tenant" in September-ish.

I do have tenancy agreements, receipts and the permission of both my mortgage lender and insurance company.

Any advice gratefully received.

Clare

Do you rent the room with all bills included. I think if you split it so the rent is lower but then you split the bills as in a house share it isn't rental income - just the lodgers paying their share of the services they are using. I don't think the expenses can be offset and still use the rent a room scheme - you already have a tax discount in that I think it might be an either / or.