Rent a Room Scheme - help please

specsappeal

Hi guys,
My DH and I own our home and have a spare room. We have been looking at taking in a lodger under the rent a room scheme but are a little confused about the tax free limit. On the government website it says you can earn up to £4250 a year tax free but says that if you are jointly letting a room or rooms that figure halves to £2125. Does that mean that because my husband and i jointly own our home we can only earn half the limit even though we will only be letting the one room?
Sorry if it's a silly question but I am confuzzled .
Thanks.

CLAPTON

it means you can only earn 2125 each, so that means you can charge 4250 in total

00ec25

any income from renting is assumed to be earned by the owner of the house, therefore, where there are 2 owners the rent is split between them, however under the rent a room scheme the total amount per house is 4250, hence the limit is split by owner, so if 2 owners (at 50% each) the limit is £2,125 each.

therefore is you charge more than 4250 in rent per year (ie more than 354.16 per calendar month or £81.73 per week) you will each have to declare the income and may be taxed:

eg:
rent per week £90 so annual total £4680
income per owner (4680/2) £2340
tax return for each person :
rental income share £2,340 less rent a room allowance - £2,125 = tax liable amount £215 each

the purpose of this is because it allows HMRC to collect income tax at the highest possible rate, for example, if one of you is a non tax payer and the other is a high rate tax payer then one of you would get the £215 tax free but the other would have to pay 40% tax on that £215. So if the rent comes to more than 4250 per year then you will each have to do a self assessmwent tax return.

I am sure you also noticed in the guidance that the total rent received is deemed to include any "contribution" towards bills (utilities etc) as that is why the first 4250 is tax free, meaning you cannot deduct costs from the rental income, including the cost of the gas safety certificate which you are legally required to have (assuming you have gas in the house of course!) .

BexInLondon

00ec25 wrote: »

I am sure you also noticed in the guidance that the total rent received is deemed to include any "contribution" towards bills (utilities etc) as that is why the first 4250 is tax free, meaning you cannot deduct costs from the rental income, including the cost of the gas safety certificate which you are legally required to have (assuming you have gas in the house of course!) .

Is that true in a lodger situation, rather than a tenancy?

jockosjungle

You also don't have to use the scheme, you can claim the rent and then the deductions and pay tax on the whole profits from the venture

R

00ec25

BexInLondon wrote: »

Is that true in a lodger situation, rather than a tenancy?

yes, anyone having a lodger in their home is legally required to have a gas safety certificate, the law does not distinguish between tenants and lodgers

You do appreciate the a lodger occupies under a licence not a lease and therefore is included in the requirement, see here
Who is a landlord?

In relation to domestic gas under the Gas Safety (Installation and Use) Regulations 1998 (GS(IU)R 98), a landlord is anyone who rents out a property that they own under a lease that is shorter than 7 years or under a licence . Regardless of whether you are a landlord under GS(IU)R 98 you may be considered a landlord under other related legislation.

Landlords' duties apply to a wide range of accommodation, occupied under a lease or licence , which includes, but not exclusively:

• residential premises provided for rent by local authorities, housing associations, private sector landlords, housing co-operatives, hostels
• rooms let in bed-sit accommodation, private households, bed and breakfast accommodation and hotels
• rented holiday accommodation such as chalets, cottages, flats, caravans and narrow boats on inland waterways.

Renting out a room in a domestic house - Do I need a gas safety check?
If the person renting the room needed to use appliances already in the property such as cookers in kitchen or a boiler used for heating the water in the bathroom/kitchen then the home owner would need an annual gas safety check for those appliances.

I can forward you the HSE correspondence if you want!
- a British Gas Homecare plan would not be sufficient in itself to meet the requirements of the Gas Safety (Installation & Use) Regulations, 1998, as confirmed by HSE Gas Safety Policy Section

specsappeal

Thanks so much for the helpful replies. So basically we as the owners can earn up to £4250 per year tax free. I did think that when i first read the information but then i re-read it a couple of times and confuzzled myself. As the room is just a single we were thinking of charging £65 a week which is £3380 per year so under the limit of £4250. Have just looked into it further and as we are/will be under the limit it won't affect our tax credits either so thats a bonus Would I still need to inform the tax credit agency even though it won't affect our claim?
Once again guys thanks very much for the help - it is very much appreciated.
Also I had my boiler serviced last month and the engineer signed it off on the paperwork that was given to us when the boiler was put in - is this the same as a gas safety certificate??

00ec25

specsappeal wrote: »

Also I had my boiler serviced last month and the engineer signed it off on the paperwork that was given to us when the boiler was put in - is this the same as a gas safety certificate??

legally speaking no - you need a formal gas safety certifcate which is a specific form that a registered gas safe engineer has to sign.
your engineer could do it if they hold such registration, but would probably charge you for the extra "work" - for example I was quoted £25 extra for the certificate on top of the service charge