Rent a Room and utilities / bills

iamfromjupiter

Hi

I'm looking at renting a room in my home and am aware of the Rent a Room Scheme that allows you to receive £4,250 a year in rent tax free.

This equates to around £354 a month. I'm aware that under the scheme you cannot deduct expenses which I assume means if I include bills in the rent, these cannot be deducted under this scheme and you therefore do a calculation to ascertain whether the lower tax bill comes from paying tax on the excess of rent over allowance or of receipts over expenses.

If the room is 'rent only' and bills are split between us as they arrive (as would typically be done if renting a property with a friend say) does the money received to pay the bills (i.e 50% council tax bill, 50% electricity bill etc with no profit element) get included as a rental receipt?

Many thanks in advance for your responses!

Mel

00ec25

iamfromjupiter wrote: »

If the room is 'rent only' and bills are split between us as they arrive (as would typically be done if renting a property with a friend say) does the money received to pay the bills (i.e 50% council tax bill, 50% electricity bill etc with no profit element) get included as a rental receipt?

yes - under the rent a room scheme "rent" includes ALL income you receive whether that be the rent or a "contribution" towards their "share" of bills. IOf you did not do the RAR scheme then you as LL would be allowed to claim 50% of the bills as a cost against your business, you can't have your tax free cake and also eat it as a claimable deduction under the RAR scheme

That is what is meant by no deductions, you can't deduct (ie exclude) money received for other purposes related to letting the property - note strictly speaking that also includes any money they pay towards other household expenses such as contributions towards milk, tea or toilet paper - they are all expenses and so cannot be excludedfrom the declared income

your analogy with a houseshare is not valid - in a sharing situation your fellow sharer is not making a profit from you. As the LL, you most certainly are making a profit from your lodger, so can't claim any expenses against that income - whether you call it rent or something else, it's all your taxable income

iamfromjupiter

00ec25 - thank you very much for that clarification. Much appreciated!