rent a room scheme utility bills

nick_cartwright

I am thinking of getting a tennant under the rent a room scheme whereby £4250 of 'rental income' is tax free. I am not clear on what is HMRC class as 'Income'

If I have a tenant my gas water and electric consumption will go up. if I charge the tenant half of these bills then is this classed as income? eg if I charge my tenant £6k per year but make him/her pay half the gas/elec/water (for the sake of arguement say 50% of these bills) in addition to the £6k then surely my taxable income under the rent a room scheme is £1750? how can HMRC tax you on money that solely pays the tenants utility bills? it cant be income for me as it goes to the utility provider? I cant charge the tenenat 20% more for the bills to offset my additional tax as this is agaonst the law

anselld

nick_cartwright wrote: »

I am thinking of getting a tennant under the rent a room scheme whereby £4250 of 'rental income' is tax free. I am not clear on what is HMRC class as 'Income'

If I have a tenant my gas water and electric consumption will go up. if I charge the tenant half of these bills then is this classed as income? eg if I charge my tenant £6k per year but make him/her pay half the gas/elec/water (for the sake of arguement say 50% of these bills) in addition to the £6k then surely my taxable income under the rent a room scheme is £1750? how can HMRC tax you on money that solely pays the tenants utility bills? it cant be income for me as it goes to the utility provider? I cant charge the tenenat 20% more for the bills to offset my additional tax as this is agaonst the law

The 4250 is an alternative to claiming expenses such as bills. It is not simply a tax free allowance. Hence bills need to be included either by renting "bills inclusive" or by including what you charge for bills in the income.

Andrew_Cottrell

nick_cartwright wrote: »

I am thinking of getting a tennant under the rent a room scheme whereby £4250 of 'rental income' is tax free. I am not clear on what is HMRC class as 'Income'

You have the choice of either deducting expenses and paying income tax on the remainder, or not deducting expenses and paying income tax on any amount over £4,250.

Expenses might include gas, electricity, water, council tax, wear & tear, insurance, repairs, and others.

See http://www.hmrc.gov.uk/individuals/tmarent-a-room-scheme.shtml

You may be interested in the discussion on the following thread:
Rent a room scheme - what bills must be included?

phill99

How can your utility consumption go up by 50% by having a lodger. The heating will cost you the same whether you have one person or 4 in the house.

The light in the kitchen costs the same whether one person is using it or 20.

katejo

Andrew_Cottrell wrote: »

You have the choice of either deducting expenses and paying income tax on the remainder, or not deducting expenses and paying income tax on any amount over £4,250.

Expenses might include gas, electricity, water, council tax, wear & tear, insurance, repairs, and others.

See http://www.hmrc.gov.uk/individuals/tmarent-a-room-scheme.shtml

You may be interested in the discussion on the following thread:
Rent a room scheme - what bills must be included?

Water should only be included if you have a water meter, not if you pay a fixed amount.

Andrew_Cottrell

katejo wrote: »

Water should only be included if you have a water meter, not if you pay a fixed amount.

This post, on the other thread, suggests otherwise.

tbs624

phill99 wrote: »

How can your utility consumption go up by 50% by having a lodger. The heating will cost you the same whether you have one person or 4 in the house.

The light in the kitchen costs the same whether one person is using it or 20.

I'd agree that the costs are unlikely to increase by anywhere near as much as 50% but phill99 doesn't allow for the fact that the Lodger and the OP may have different work/social timetables so Lodger may be at home with heating/lighting in use whilst OP is out of the property. Lodger will also presumably use the washing machine and electric shower, for example

tbs624

OP - you may find it helpful to take a look at http://www.lodgerlandlord.co.uk and the HMRC's own pages on the RAR scheme (to which a previous poster has linked)

As you will be a residential LL note that any room you let in the same property as the one you live in will be let to a *lodger* and not a *tenant*.

It's important that you understand the distinction - your let would not, for instance, be under an AST agreement and there is therefore no requirement for you to scheme register a Lodger's deposit. You should also check out the difference between a Lodger who is classed as an "excluded occupier" and a Lodger who may be classed as an "occupier with basic protection"

katejo

Andrew_Cottrell wrote: »

This post, on the other thread, suggests otherwise.

What I meant was that I can't understand why certain costs should be included in expenses when having a lodger makes no difference to the cost. Maybe HMRC does allow them but why? That's why I stick to rent a room. I simply don't know what is reasonable to claim.
For example: Someone who is letting a room in their own house will not have extra water costs if they have no meter.

Amber_Sunshine

Two people showering, doing laundry, cooking, in separate rooms etc. will increase bills substantially, if not necessarily as much as 50%. Some people are not careful about keeping bills down and will leave lights on, turn heating up, have it on for longer etc.

phill99 wrote: »

How can your utility consumption go up by 50% by having a lodger. The heating will cost you the same whether you have one person or 4 in the house.

The light in the kitchen costs the same whether one person is using it or 20.

katejo

Amber_Sunshine wrote: »

Two people showering, doing laundry, cooking, in separate rooms etc. will increase bills substantially, if not necessarily as much as 50%. Some people are not careful about keeping bills down and will leave lights on, turn heating up, have it on for longer etc.

That sounds more relevant to a house full of bedsits with tenants. A lodger shares living area and kitchen with the flat/house owner. The rent a room scheme is only relevant to the lodger situation.