Is there Tax payable when 'subletting'

aldredd

Hope this is the right place for this question...

I currently rent privately through a family friend.
Works well, as we're pretty free to live in it how we like, decorating etc - his only real concern is getting paid. (Thus there is no written contract, deposit etc)

I've been offered an overseas role on a fixed 12-18 month contract (to be decided) with my existing employer. I'm keen to continue renting the property so as we have somewhere to keep what property we don't want to take, and have a home to come back to at the end - and indeed somewhere to come back to as & when we come for a visit etc.

My plan is for someone - my brother I think - to basically house sit - but pay to do so. The landlord has indicated he is happy in principle with the idea as long as it's still me paying the rent. My intention is to charge much less than what I'm paying in rent - and that will also include all utilities, as I will continue to pay these too. So overall, I'm only getting back around 50% of what it costs me.

Now, I don't think I would have to pay any tax on that income, but wanted to check. Direct.gov says that you have to pay on any income less allowable expenses. Whilst the allowable expenses are stated as being council tax, utilities etc - it only mentions 'interest on loan payments' as another - it doesn't specifically allow for existing rental costs.

Does anyone know what the situation would be here?

Thanks for your help

Alter_ego

I think you will find it is taxable, but only HMRC know for sure.

Werdnal

Any income needs to be declared, regardless of where it comes from. You complete a tax return, and some of the costs you mentioned are allowable against the income. HMRC will decide what, if anything, you need to pay them.

aldredd

Thanks Werdnal - I just wonder if 'Rental Paid' would be deemed an allowable expense.

About 50% of it would be on utilities & council tax anyway (which I think are allowable), so it would only be the final 50% which I'm potentially exposed to, right?

Errata

The money you receive from the sub-tenant will be classed as income and taxed accordingly. There are no allowable expenses to offset as you won't be a landlord nor a business.

Werdnal

Errata wrote: »

The money you receive from the sub-tenant will be classed as income and taxed accordingly. There are no allowable expenses to offset as you won't be a landlord nor a business.

Of course, you are correct - utilities, council tax etc, are the responsibility of the tenant, so if the tenant decides not make the subtenant pay them, they are not deductable. I was in LL mode when I replied!

The costs you are be able to deduct would be repairs, mortgage interest, running costs (ie agents fees etc), and other things incurred by a LL, not the things OP would normally pay if they were living there!

Thanks for the correction and apologies for confusion!

aldredd

ooo - just found THIS which would suggest I can take into account rent.

Allowable expenses
The most common types of expenses you can deduct are:

water rates, council tax, gas and electricity
maintenance and repairs to the property (but not improvements)
and contents insurance
interest on a mortgage to buy the property
costs of services, including the wages of gardeners and cleaners
letting agents fees
legal fees for lets of a year or less, or for renewing a lease of less than 50 years
accountant’s fees
rents, ground rents and service charges

aldredd

Errata wrote: »

The money you receive from the sub-tenant will be classed as income and taxed accordingly. There are no allowable expenses to offset as you won't be a landlord nor a business.

oh, that's not good

But surely, if you're taxed on your 'net profit', I'm not actually making any profit to be taxed on?

hmm, not liking this. Presumably, if we changed it so that my brother pays his share directly, and I pay the rest - there would be no such issue?
Maybe I'll press for that then

andylcq

Werdnal wrote: »

Any income needs to be declared, regardless of where it comes from. You complete a tax return, and some of the costs you mentioned are allowable against the income. HMRC will decide what, if anything, you need to pay them.

yes, i agree:money:

Errata

But surely, if you're taxed on your 'net profit', I'm not actually making any profit to be taxed on?

But you're not a landlord or a business, so can't make a profit on what you're 'selling'. Or a loss.

ILW

Surely by sub letting and charging rent, one would automatically become a landlord.