Income and lodger rent - tax question

fairy_princess

Hi all, this is my first time here, I have a confusing but simple question and I have been unable to find a clear definitive answer but basically:

I have a job which is my main income and I am also currently renting out a spare room in my flat too to my lodger as per the rent a room scheme.

I pay income tax on my earnings through my job as per PAYE, however my income from my lodger's rent for the tax year 2011-2012 will be below the £4000 something threshold if she continues to reside her upto April, as she moved in during the winter 2011.

On directgov/hmrc site it states rent does not need to be declared if less than that £4000something threshold but i am wondering are they assuming that the rent from a lodger is the only income or does it mean it is regardless and separate to any other income, so in my case from my from my job?

As i do not want to be unknowingly in the wrong, and if i have to do any tax return as my income from employment + lodger rent will be over the threshold. I would like to know so i can figure how to do that too.

I hope you understand what I am trying to ask.

Thank you guys in advance.:rotfl:

jimmo

Its regardless.
Rent a room is a bit of a political thing supposedly to encourage people with a spare bedroom to ease the country’s housing crisis by taking in a lodger and providing a convenient tax break. So, if you have rental money coming in of less than £4250 in a tax year you have no tax to pay.
If your lodger is paying you at a rate of more than £4,250 per year you will probably have to think differently and compare the Rent a Room scheme with the more traditional letting income rules.
When I bought my first home, a 2 bedroom flat, I had a lodger. I had the bigger(double) bedroom and my lodger had the smaller (single) bedroom.
The rest of the flat we shared. We had a kitty for food. I did the cooking and my lodger did the washing up. When we redecorated the flat I bought the paint and wallpaper but we did the work between us.
In many ways we were more like brothers than landlord and tenant but when it came down to my tax liability, being a taxman, I knew how to legitimately minimise my tax bill.
For you, rent a room provides opportunities that were not available to me but you have got to change your attitude. Rent a room is not £4,000 something. It is £4,250.
You should be OK using Rent a room for 2011/12 but if your lodger is likely to pay you more than £4,250 in 2012/13 you need to seriously plan what you can do about your potential tax liability.
You may have a lot to learn but learn it now by sharing how your relationship with your lodger actually works.

fairy_princess

jimmo wrote: »

Its regardless.
Rent a room is a bit of a political thing supposedly to encourage people with a spare bedroom to ease the country’s housing crisis by taking in a lodger and providing a convenient tax break. So, if you have rental money coming in of less than £4250 in a tax year you have no tax to pay.
If your lodger is paying you at a rate of more than £4,250 per year you will probably have to think differently and compare the Rent a Room scheme with the more traditional letting income rules.
When I bought my first home, a 2 bedroom flat, I had a lodger. I had the bigger(double) bedroom and my lodger had the smaller (single) bedroom.
The rest of the flat we shared. We had a kitty for food. I did the cooking and my lodger did the washing up. When we redecorated the flat I bought the paint and wallpaper but we did the work between us.
In many ways we were more like brothers than landlord and tenant but when it came down to my tax liability, being a taxman, I knew how to legitimately minimise my tax bill.
For you, rent a room provides opportunities that were not available to me but you have got to change your attitude. Rent a room is not £4,000 something. It is £4,250.
You should be OK using Rent a room for 2011/12 but if your lodger is likely to pay you more than £4,250 in 2012/13 you need to seriously plan what you can do about your potential tax liability.
You may have a lot to learn but learn it now by sharing how your relationship with your lodger actually works.

Thank you for the telling off :-)

well my lodger's rent will be definately be less then the the £4000 something i mean £4250 for the year 2011-2012, and for 2012-2013, well I intend to be married by the summer and will be politely asking her to move out as soon as my fiance arrives in the UK.

As i am applying for his fiance visa that is why i wanted to make doubly sure that I don't have to pay any tax as I don't want the consulate to have something to get picky about.

with regards to my lodger's relationship, erm well i had a lodger agreement made for me by a solicitor and so i know by law she is a lodger, and she pays me rent including utility bills.

She is a lovely lady and she works on the weekends and weekdays some evenings, so when i am at work she is at home and vice versa.

I do not cook for her, or she for me, but we just share cleaning jobs of the kitchen and bathroom and rest of the flat is my responsibility as it is my property and she is mainly in her room when i am at home so living room etc is all mine.

does that affect anything?

thanks again!

jimmo

The way I read your original post you seemed to be implying that whilst your 2011/12 income from your lodger would be less than the rent a room ceiling of £4,250, that was because she will only have been with you for a short time. To me that implies that the annual rate of the rent you receive would be more than £4,250 and you may have tax problems.
Now that doesn’t seem to be the case. If your lodger will never pay you more than £4,250 in a single tax year there are absolutely no Income Tax consequences for you. You don’t need to declare anything to HMRC.
So, hopefully, you can put Income Tax to one side but I have absolutely no idea whether the fact that you have a lodger could impact on your fianc!’s visa.
That is most definitely not a tax issue.

katejo

fairy_princess wrote: »

Thank you for the telling off :-)

well my lodger's rent will be definately be less then the the £4000 something i mean £4250 for the year 2011-2012, and for 2012-2013, well I intend to be married by the summer and will be politely asking her to move out as soon as my fiance arrives in the UK.

As i am applying for his fiance visa that is why i wanted to make doubly sure that I don't have to pay any tax as I don't want the consulate to have something to get picky about.

with regards to my lodger's relationship, erm well i had a lodger agreement made for me by a solicitor and so i know by law she is a lodger, and she pays me rent including utility bills.

She is a lovely lady and she works on the weekends and weekdays some evenings, so when i am at work she is at home and vice versa.

I do not cook for her, or she for me, but we just share cleaning jobs of the kitchen and bathroom and rest of the flat is my responsibility as it is my property and she is mainly in her room when i am at home so living room etc is all mine.

does that affect anything?

thanks again!

Just out of interest, does your lodger's rent include any council tax, maybe to compensate for your loss of the single person's council tax discount?

00ec25

katejo wrote: »

Just out of interest, does your lodger's rent include any council tax, maybe to compensate for your loss of the single person's council tax discount?

whether it does or doesn't makes no difference
the rent a room 4,250 allowance is to cover ALL costs that would otherwise be an eligible cost under the "normal" method.
you cannot claim that part of the rent is for the CT and therefore is outside the rent a rtoom scheme, it isn't, its inside the scheme and forms part of your 4,250