Tax credits and income from property???

Murgatroyd21

If, at the end of the financial year you have made a profit from property income (it goes under Other Income on a tax credit form) you can deduct £300 from the total of all Other Income added together when declaring it.

phoenix2010

Finally after 5 days have got through to tax credits

well the answer is I declare income from tenants from april 2009 to april 2010 minus

-fees paid to agent
-interest on mortgage
-buildings insurance

then deduct "rent a room " allowance of £4250

then deduct £300

which actually leaves me with a minus figure so is negligable

Phew

Thats from the lady on the tax credits helpline and assuming she knows her stuff

Now must get round to filling in tax form for said property

Thankyou

DanE2010

Im not entirely sure thats correct advice there............did u tell tax credits that your letting out the whole property? the rent a room scheme is if you have a lodger living in your home is it not? Im not sure of the specifics but dont think you come under that scheme.

If your letting out a property you need to declare your pofit after expenses and then deduct the first £300 as has been mentioned above. Tax Credit staff arent trained in self assesment so you would be best ringing the self assesment helpline to establish what deductions you need to make etc, once you know what your total 'other HH income' was for last year you can take off that £300 and then declare the figure to tax credits. If your not sure what the estimate for this current year is going to be then carry forward the same figure as last year or a figure slightly over estimated compare to last year to cover yourself.

DanE2010

hmmmmm just found this http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4017804

The Rent a Room scheme


If you already have a lodger or are thinking about letting furnished rooms in your home, you can receive up to £4,250 a year tax-free (£2,125 if letting jointly). This is known as the Rent a Room scheme.
How the scheme works

The Rent a Room scheme is an optional scheme that lets you receive a certain amount of tax-free 'gross' income (receipts before expenses) from renting furnished accommodation in your only or main home.

Who can take advantage of the scheme?

You can choose to take advantage of the scheme if you let furnished accommodation in your only or family home to a lodger. (Your only or family home is the one where you/your family live for most of the time. A lodger is someone who pays to live in your home, sometimes with meals provided, and who often shares the family rooms.)
A lodger can occupy a single room or an entire floor of your home. However, the scheme does not apply if your home is converted into separate flats that you rent out. In this case you will need to declare your rental income to HM Revenue & Customs (HMRC) and pay tax in the normal way. Nor does the scheme apply if you let unfurnished accommodation in your home.

• Tax on residential property income outside Rent a Room

Do you have to be a home owner?

No. You can choose to take advantage of the Rent a Room scheme, regardless of whether you are a home owner or are renting your home. However, if you are renting, you should check whether your lease allows you to take in a lodger.
If you're a mortgage payer it's best to check whether taking in a lodger is within your mortgage lender's and insurer's terms and conditions.

If you share a home and both let a room or rooms

If you are both letting furnished accommodation in your joint home, you will each be entitled to receive half of the allowance (up to £2,125 for the 2010-11 tax year) without paying tax.

If you provide meals and laundry services

If you charge for additional services, you will need to add the payments you receive to the rent, to work out the total receipts. If you get more than £4,250 a year in total, you will have to pay tax, even if the rent is less than that.

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 (2010-11 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.

• Expenses you can claim outside the Rent a Room scheme

Rent a Room scheme and running a business


If you run a bed and breakfast business or a guest house, or provide catering and cleaning services as part of a letting business, the Rent a Room scheme can still apply to you. You will need to complete the relevant parts of the self-employment pages of your Self Assessment tax return.

• HMRC helpsheet for traders on the Rent a Room scheme Opens new window

How to opt in or out of the scheme


If you want to opt in

• if you don't normally receive a tax return and your receipts are below the tax-free thresholds for the scheme, the tax exemption is automatic so you don't need to do anything
• if you wish to opt in and your receipts are above the tax-free threshold, you must tell your Tax Office - you can do this by completing a tax return and claiming the allowance

If you want to opt out

• just complete a tax return within the usual deadline and declare the relevant lettings income and expenses on the property pages

So dunno if you fall into that category?? I may be wrong I dunno but best to check it out before u fill out the form, anyone else have any knowledge of rent a room scheme??

Murgatroyd21

From the HMRC website "Rent a Room applies only to owner-occupiers and tenants who receive rent from letting furnished accommodation in their only or main home".

You should use the TC825 to help calculate your figures, available here.

phoenix2010

I did say to her

"Im not renting out a room in my house , I am renting the whole property and no longer live in it "

She said it still applies

I am entitled to the same £4250 allowance

Of course Im not taking it as gospel, she may be wrong, but I did question it at the time and she confirmed it

If Im not eligible the profit I made for that year still falls below the figure which would affect my tax credits.

Thanks for the link to the form

phoenix2010

Ive seen that form before but it doesnt really seem to relate to my circumstances

Have scoured tax website and its not very helpful

I think Ill ring them and try to get it sorted out that way