Rent a Room Scheme - Allowable Expenses

anselld

From helpsheet 223 ...
The Rent a Room scheme provides two ways to work out your tax when your receipts are above the exemption limit of £4,250. You can choose which of the following two methods is best for you:
A paying tax on the profit you make from letting, worked out in the normal way for a rental business (that is, rents received minus expenses), or
B paying tax on the gross amount of your receipts (including receipts for any related services you provide) minus the £4,250.

ie You can deduct expenses (method A) or you can deduct £4,250 (method . You cannot deduct both.

00ec25

jcrpage wrote: »

I'm now slightly confused, two posts state there are definitely "no allowable expenses for rent a room scheme" yet the hmrc paperwork mentions it, just not what it covers.

I think I will go with the majority and see what I can work out for my tax return.

Thanks once again all, really appreciate it.

its a matter of the correct application of the wording. The rent a room scheme does not have 2 methods , it has one method - the rent a room method. If you choose not to use that then you are not in the rent a room scheme!

ie.

IN rent a room scheme - 4250 pa tax free, pay tax on excess. No deductions ("allowances") permitted of any sort

NOT in rent a room scheme - by definition therefore you are in the "normal" rental income method since that is the only way to calculate net rental profit outisde of the rent a room scheme - so deductions permitted as this is the normal method applicable to any rental

00ec25

jcrpage wrote: »

And thanks for the link on CGT - does that only count if you have lodgers at the time of sale or do you have to work out the years you had lodgers against the time you had the house. Not thinking of selling for a good while but interested anyway.

CGT works on the % of time the property was liable to it, ie

if you own it for 10 years and had 2+ lodgers in it in say years 3,4 & 6 and lived with only 1 (or no) lodger for the other 7 years, when you sell in in year 10 the gain is the differencne betyween what you paid for it in year 1 and what you sold it for in year 10,
3/10 of that gain is liable to CGT but partly mitigated by letting allowance
7/10 of the gain is exempt due to it being your main residennce for that time

jcrpage

Totally amazing guys. I'm now clear about 'rent a room' and I know stuff about CGT I wouldn't have even thought to ask. Thanks again to all :-)

Oh and sorry for being so slow on the uptake first time round!

Odell16

A friend is thinking on improving the facilities on an outhouse which already has heating and electricity. If she adds a shower and loo could she offset the cost of this from any rental income she receives.
Eg if these improvements cost £6k and she earned £6k the following year in rent would she have to pay any tax?

anselld

Odell16 wrote: »

A friend is thinking on improving the facilities on an outhouse which already has heating and electricity. If she adds a shower and loo could she offset the cost of this from any rental income she receives.
Eg if these improvements cost £6k and she earned £6k the following year in rent would she have to pay any tax?

The key word is improvement. Improvements are not allowale expense against revenue. They can be claimed against CGT on sale but not against income tax.