Tax on rental income as host family

shocktactics69

Hi.
I am now currently on jobseekers contribution based and partner is a director of ltd partnership, earning an income of 25k.
We were looking at taking in International students to help with some income and as my job, but the rent a room tax rules confuse me as my partner pays all mort and bills etc but it would be me looking after the students and possibly getting the income to contribute towards my share of the household food for students etc.
the rent a room allowance scheme is £4200 ish tax free income earned, this is halfed if joint....is this classed as joint?

I understand I may have to register to pay tax on the income or should it just go in his name and the income paid to him to pay the tax as he is already set up as self employed?
Which will be the easiest to manage?
Any help would be great.

dori2o

shocktactics69 wrote: »

Hi.
I am now currently on jobseekers contribution based and partner is a director of ltd partnership, earning an income of 25k.
We were looking at taking in International students to help with some income and as my job, but the rent a room tax rules confuse me as my partner pays all mort and bills etc but it would be me looking after the students and possibly getting the income to contribute towards my share of the household food for students etc.
the rent a room allowance scheme is £4200 ish tax free income earned, this is halfed if joint....is this classed as joint?

I understand I may have to register to pay tax on the income or should it just go in his name and the income paid to him to pay the tax as he is already set up as self employed?
Which will be the easiest to manage?
Any help would be great.

Is the property in joint names? Will the gross income you receive be in excess of the £4250 rent a room relief?

Please see HS223 here that will give more information.

http://www.hmrc.gov.uk/helpsheets/hs223.pdf

shocktactics69

Hi, thanks for your reply
No the property we live in is in his name only on the mortgage and bills.
I am unsure about the amount but I think it will be a small amount over the £4250
S x

shocktactics69

I did read the info but it was the joint bit that confused me and thats why I wondered if it was best declared by either one of us but as we live together it may be the wrong thing to do.
S x

dori2o

If the property is in one name only then the income in the eyes of HMRC belongs to the owner of the property and should be declared by them.

jimmo

I rather think the key to this is what, exactly, does being a host family involve?
If the international students come to live with your family and you provide meals, clean their room(s) and provide food then you are more likely to be trading, as opposed to letting.
In that case there are all sorts of possibilities.
Can you expand on what is involved in being a host family and how much (gross) income is likely to arise in a year?

dori2o

jimmo wrote: »

I rather think the key to this is what, exactly, does being a host family involve?
If the international students come to live with your family and you provide meals, clean their room(s) and provide food then you are more likely to be trading, as opposed to letting.
In that case there are all sorts of possibilities.
Can you expand on what is involved in being a host family and how much (gross) income is likely to arise in a year?

Good point.

as the helpsheet above confirms

Some lettings may amount to a trade. This is likely to happen where you run a guest house or bed and breakfast business, or if you provide material services, for example, meals and cleaning. If your lettings amount to a trade, Rent a Room relief may still be claimed, but you should exclude any assessable profits from your rental business and return them as trading profits.

shocktactics69

Hi,
I hadnt thought of it as trading but perhaps your right.
The students are sent by a language school and they pay a fee for accomodation say £12 per night and you have to provide them with breakfast, packed lunch and evening meal with thier own room and light washing if required.
The school recieve the money from the students and they pay me the fee weekly to cover cost of food and share of utilities etc.
I would imagine the gross income depends on how often you are used by the school but I think I am looking at about £4-6k per year in gross fees paid.
hope this explains a bit better.
S x

jimmo

Leaving Rent-a-Room out of it for the time being I suppose that the first thing to consider is that if your annual gross income will be £4 - 6k then just deducting the food costs is going to mean that your taxable profits will be well below the gross and definitely below your Income Tax personal allowance of £6,475 (£7,475 from 6/4/11).
If this were your only source of income there would be little point in worrying about the finer details because there would be no tax liability.
However, you are currently claiming Jobseekers Allowance which is taxable. Also I have absolutely no idea whether your trading would have a knock-on effect on your Jobseekers Allowance or any Tax Credits you may be claiming.
In terms of trading it is quite feasible to set this up as:
1) You, as a sole trader.
2) Your OH, as a sole trader.
3) You and your OH in a partnership.
In addition to all that and whilst I have never seen it done, it is feasible to split or apportion the money received between your OH's letting business and your trade of providing food and services.
In the following link scroll down the page until you come to "Letting property and providing additional services".
http://www.hmrc.gov.uk/manuals/pimmanual/PIM4300.htm
Coming now to Rent-a-Room, the basic idea is that a taxpayer should determine his, or her, taxable profits using the normal rules for letting or trading as appropriate and then examine whether Rent-a-Room is a better deal.
One way or another you and your OH can use the Rent-a-Room exemption of £4,250 each year but whether it will be worthwhile is an open question.
The real question now is how complicated do you want, or need, to make this?