letting a room

geejayem

This last 7 years i have taken the risk of renting my house out and not declaring it.I've had enough of this now as my tennants have been a pain in the ar5e,,i now have my house back and am thinking of taking on a lodger.From now on though i want to do it legitimately as there are too many snitches out there...Would i have to declare the income to the inland revenue if it was under a certain amount per annum or do i have to declare it anyway,,,i'm sure i heard somewhere that i could earn a certain amount tax free,,Cheers

00ec25

I shall refrain from passing moral judgement on your past affairs :eek:

where you are genuinely living in the property as your main home and have a lodger , then under the Rent a Room Scheme you can earn up to £4,250 pa tax free. This is the total income you receive, it is not just "rent", if you charge the lodger rent plus £x towards bills, then the total income is rent +£x

if this total is <4,250 you do not have to declare this on a tax return if you have not already been instructed to do a tax return (the latter seems unlikely given what you say ):

if you already do a tax return you simply tick a box saying your total income is below the rent a room scheme limit and you do not provide any further details

if your income is >£4,250 you are required by law to do a tax return and you wil pay tax on the amount above that limit (eg income 5,000 you pay tax on 5,000 -4250 = 750 @20% = £150 tax

cake21

Bit more info from the directgov website:
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 (2009-2010 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.