Claiming interest on mortgage for lodgers

jon2_2

I am a live-in landlord with two lodgers.

I am filling in my tax return for 08-09 and trying to figure whether to use rent-a-room relief or claim expenses.

The crux of it is how much, if any, of the interest on my mortgage I can claim as an expense. As I see it, if I can get my expenses to above £4250 (mortgage interest, maintenance, new boiler, ground rent, etc), then it's worth not using rent-a-room.

Various sources have said I can take
- 2/3 (as each of us get equal use from the house)
- 2/7 (as two of the seven of the rooms are lodger's bedrooms, assuming a toilet counts as a room)
- 30% (as this is the proportion of floor space of the flat taken up by lodger's bedrooms)

The HMRC guidelines (e.g. PIM2105 - I can't post a link, but it's on the HMRC website) are not definitive on the matter.

Is there any definitive source for this - or is it subjective? Which one should I go for?

Also, can I ask
- is a new boiler an acceptable expense?
- is general house improvements allowed as expenses (e.g. materials for DIY I've done to the house)?
- is equipment for the house an allowed expense (e.g. a new kettle)?
- do I need to pro-rata all expenses using the same ratio as for mortgage interest?

Finally, what's the impact on CGT by using the expenses system rather than rent-a-room? Do I need to worry about it now if I'm not planning to sell the property in the near future?

Thanks in advance!

Fire_Fox

Best thing to do is to ring the inland revenue and get your information 'from the horses mouth' - they are usually pretty helpful.

Thrugelmir

jon2 wrote: »

Finally, what's the impact on CGT by using the expenses system rather than rent-a-room? Do I need to worry about it now if I'm not planning to sell the property in the near future?

Thanks in advance!

If you want to claim expenses then part of any future gain will be subject to CGT as you are operating a business.

You are sub letting, not a live in landlord .