Tax on tenants rent

aj9648

Guys,

I wonder if you can help me. I am just in the process of buying a house with a friend of mine and we are hoping to rent two of the rooms and live in the other two.

I was wondering what the tax implication was with regard to this. Our mortgage payments are going to be £1250 pm and the rent that we receive from the tenants would be £300 per room per month (£600 in total).

Do we need to inform the HMRC about this? Is there a tax allowance? Will we have to pay tax on any of the money we receive from the tenants?

So many questions !!!

Thanks

pusscat

I am no expert but it sounds like you could make use of the "rent a room scheme" which allows you to rent out a room in your house for up to about £4500 a year and pay no tax on the income. Do a search on the net on "rent a room" and you will get loads of advice. There is a fact sheet from HMRC.

I am not sure if both of you could make use of this scheme on the same house at the same time - need to read the small print. AFAIK you declare the income onyour tax return, but you are not taxed on it.

You may also need to look out for House of Multiple Occupation legislation - this is where a house is occupied by a number of people who are not related - I think it is 5 people but I am no expert. There are some people on here who know a huge amont about the details. If you do classify as a HMO then there are a whole number of other hoops to jump through.

You will need to tell your insurers that you are renting out rooms and this may well increase your premiums for both building and contents.

You may want to consider having some form of liability insurance - so if one of your tennants falls down the stairs and breaks their neck you are covered if sued.

Puss

aj9648

Is there any advantages of treating the property as rental property?

pusscat

Don't understand what you mean sorry - can you be more specific?

Thanks

Puss

aj9648

I mean generate annual accounts for the property and that way we can offset any expenses that we have

Does that make sense?