calculation of tax on rental income in excess of "Rent a room allowance"

katejo

If your rental income exceeds the allowed £4250 by just a small amount (about £300) does the tax office then charge tax on the whole amount or just the amount in excess of £4250?
I am considering charging my lodger a reduced rent for Feb and March just to avoid exceeding the limit.

G_M

Full details here.

BitterAndTwisted

Dunno but I suspect it's the whole lot. The scheme don't allow you to be in it for the £4250 and out of it for the balance. Nice idea but HMG need all the taxes they can collect.

Is your lodger's weekly/monthly payment inclusive or exclusive of utilities and CTax?

BoGoF

BitterAndTwisted wrote: »

Dunno but I suspect it's the whole lot. The scheme don't allow you to be in it for the £4250 and out of it for the balance. Nice idea but HMG need all the taxes they can collect.

Is your lodger's weekly/monthly payment inclusive or exclusive of utilities and CTax?

That's wrong, you only pay tax on the excess over £4250

m1ntie

BoGoF wrote: »

That's wrong, you only pay tax on the excess over £4250

Agreed I have been doing it for 7 years.

00ec25

m1ntie wrote: »

Agreed I have been doing it for 7 years.

agreed, excess only

sitesafe

How much do they tax the excess on? What percentage? As in would it be worth charging the lodger more than the £80 a week in the end?

00ec25

sitesafe wrote: »

How much do they tax the excess on? What percentage? As in would it be worth charging the lodger more than the £80 a week in the end?

you only pay tax on the excess and are taxed at your highest marginal income tax rate
for every £1 over the £4,250 pa allowance you keep at least 50p (50% tax rate) or 60p (40% tax rate) or 80p (20% tax rate)

so why do you think he would be better off getting less rent?