Renting out my fiancees room... its not that bad!!!

PitRejection2359

Hi all

I am currently living with my fiancee and her sister in a house they own together (its a bit of a nightmare, but not too bad !!). As I'm in the Royal Navy, I will be moving around a lot, and when we get married we obviously want a place of our own (probably a married quarter, or just rent something together).

Hopefully when we get a place together, my fiancee will rent out her room to cover her mortgage payments. She does not have a buy to let mortgage, so will have to check with her lender to make sure this is OK first. Our question is, will she be taxable on this 'income' if it is directly paying her share of the mortgage? If she is, how do we go about making sure it is a little as possible?

Having looked at the 'rent a room scheme', I got a bit more confused! Her share of the mortgage is probably exactly the rent she can expect - about £300 a month, which over a year is less than the £4250 stipulated on the above page. Does that mean that she can rent it out for the year (but has to decalre it as it is longer than the 6 months mentioned), but is still not taxable?

Any help on this is very much appreciated. Many thanks

Cocksy

silvercar

Logic says you shouldn't have to pay tax.

Which rule you use to ensure this I'm not sure:

a) rent a room scheme - though I thought that was for lodgers who lived with you.
b) "business expenses" as in buy-to-lets, where the mortgage interest is allowable against the rent.

Remember when you sell the property you can count is as your principal private residence and not pay tax on any profit. Some armed forces ruling which lets you have tax relief on a property that you don't live in, due to the nature of your job. Can't remember the name of this rule.

PitRejection2359

silvercar wrote:

Logic says you shouldn't have to pay tax.

Which rule you use to ensure this I'm not sure:

a) rent a room scheme - though I thought that was for lodgers who lived with you.
b) "business expenses" as in buy-to-lets, where the mortgage interest is allowable against the rent.

Remember when you sell the property you can count is as your principal private residence and not pay tax on any profit. Some armed forces ruling which lets you have tax relief on a property that you don't live in, due to the nature of your job. Can't remember the name of this rule.

Thanks silvercar - I'll ask the pay guys on base about forces tax relief. The only drawback is that the property is not in my name - just my fiancees and her sisters, so I'm not sure how much levvy I'll be able to carry even being her wife, but I will ask.

If it is possible, I imagine we would go for the 'lodger' avenue - it seems simpler, but I may be missing something!

What exactly is the difference between a lodger and a tenant? There is obviously a legal difference, I would have thought, but I dont know a lot about this! Cheers!

Paul_Herring

cocksy_boy wrote:

What exactly is the difference between a lodger and a tenant?

A quick google search seems to suggest a lodger shares your accommodation with you, a tenant doesn't and has their own part of the accommodation. From http://www.winchester.gov.uk/General.asp?id=SX9452-A781BE86 for example

Winchester_Council wrote:

What is the difference between having a lodger and sub-letting?
A lodger shares the house with you. They will pay you for food and upkeep. A sub-tenant has part of the house solely for their own use. You would need their permission to go there.