Lodger rules

Camberwell_Kat

Hi,

I'm in the process of buying a 2-bed flat, and have a friend who will be moving in and paying me rent.

I understand there's an annual tax allowance of £4250 under the rent-a-room scheme, but wondered if this was only for rent paid? I was thinking of asking for £350 pm in rent, plus bills (probably about £475 all inc). By "bills" I mean gas, water, electricity, phone, telly. £350 is under the threshold, but £475 isn't - which figure is the one the inland revenue is concerned about?

Also, is there anything else I should be aware of when it comes to charging a friend money for the use of my spare room?

Thanks for your help!
Kat

Rimo2021

Camberwell_Kat wrote: »

Hi,

I'm in the process of buying a 2-bed flat, and have a friend who will be moving in and paying me rent.

I understand there's an annual tax allowance of £4250 under the rent-a-room scheme, but wondered if this was only for rent paid? I was thinking of asking for £350 pm in rent, plus bills (probably about £475 all inc). By "bills" I mean gas, water, electricity, phone, telly. £350 is under the threshold, but £475 isn't - which figure is the one the inland revenue is concerned about?

Also, is there anything else I should be aware of when it comes to charging a friend money for the use of my spare room?

Thanks for your help!
Kat

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

read all the rules at the above link.

scrummy_mummy_2

Rent a Room Scheme????...Thank God Labour thought of that one for us, left to our own devices us poor illiterate members of the populous would never had thought of it ourselves!
All hail Tony.....(I'm assuming it was our illustrious leader and his henchmen!)

Sorry, I'm a bit old (40) and didn't even know the Revenue were taxing renting your spare room! What's next Oh, I know, we should suggest they tax the carbon emissions on exhaling. Count up the number of times you breathe a day and declare on your next self assessment form! If you refuse to pay or suggest it is ridiculous, you'll be lambasted for your flagrant diregard for the planet and socially isolated possibly!

If it's a friend...why fess up the extra income to the Revenue?
How in the name of the Good Lord are they ever going to find out about an 'informal' arrangement made between you and your mate for her to stay in your spare room...where a tiny (and it is tiny) amount of money changes hands...it could just be that you call the money she gives you the food money....it's not rent as defined by a tenancy agreement....she has limited (if any, although not entirely sure what) 'rights' under the arrangements after all!
Make sure she brings her own bed and then the room won't be furnished by you so you'll be exempt anyway!...
I personally think we all pay enough to the Revenue in taxes, Stamp Duty, VAT, NI, PAX the list is practically endless.....
Surely, the only way they can possibly get money off you is if you tell them!
I'd keep my mouth shut. Not saying it's legally right....just a pathetic tax in my opinion.
I'm normally straight down the line with all things tax and legal but this is just feeble (in my opinion) and I would not play. Life is hard enough for first time home owners and 'having' to rent your room out is enough of a sacrifice in my opinion.
Am I strangely amoral??? This has really got under my fur actaully and I may obsess about it this evening cos it's made me really cross.
Perhaps we'll have to pay a tax dependent upon the number of visitors that cross our threshold in future and they'll support it by claiming it's to pay for more nurses for very sick little children in Great Ormond Street....
I'm not advocating not paying income tax because you don't agree with it or anything...this tax just seems ridiculous to me.

OOOhhhhh........:mad:

Camberwell_Kat

Yeah, I'm probably being too honest, but letting my room to a friend still constitutes over £4000 extra a year for me, a extra sum of money that if my employer added it to what they pay me, would tip me into the higher tax bracket.

Oh, and the threshold is (I think) quite a generous £4250 - anything below that you may NO tax.

I'm an FTB, and could have easily bought a 1-bed flat, but preferred having the space and not needing to move for a while, so stretched my finances to buy a 2-bed with the option of letting my second room. I was extremely lucky to have the opportunity to do so - and I think I should pay my taxes so that those less fortunate have a chance too.

Sorry if it gets under your fur - but I agree with this tax as well as most others, especially if they get at the money currently lining property owners' and buy-to-letters' pockets.

I'm certain that sentiment won't get me many votes on this forum, so you may all commence your stone-throwing now!

seven-day-weekend

Original post Deleted for innaccurate information.

seven-day-weekend

I think it is only for rent.

See the link....

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4017804

seven-day-weekend

scrummy mummy, the government allow you to earn around £4250 for renting a room.

It is still extra income so I think we all ought to count ourselves lucky we are not taxed on the entire amount!

nick74

scrummy_mummy wrote: »

Rent a Room Scheme????...Thank God Labour thought of that one for us, left to our own devices us poor illiterate members of the populous would never had thought of it ourselves!
All hail Tony.....(I'm assuming it was our illustrious leader and his henchmen!)

Nope, "Rent a Room" goes back to the Major & Lamont years!

Debt_Free_Chick

Camberwell_Kat wrote: »

I understand there's an annual tax allowance of £4250 under the rent-a-room scheme

Kind of, yes. If you let a room, you can collect up to £4250 as "rent" and you don't need to declare it as income, for tax purposes.

but wondered if this was only for rent paid? I was thinking of asking for £350 pm in rent, plus bills (probably about £475 all inc). By "bills" I mean gas, water, electricity, phone, telly. £350 is under the threshold, but £475 isn't - which figure is the one the inland revenue is concerned about?

Let's keep it simple Either charge up to £4250 "rent" with bills on top, or a total of £4250 rent, but don't require the lodger to pay extra for bills.

Generally, it's very difficult to apportion bills to a lodger - how much gas, electricity etc do they actually consume? So just call it £4250 rent, to include certain bills (the ones you can't apportion) but insist that they pay their own share of the phone bill.

Rimo2021

Debt_Free_Chick wrote: »

Let's keep it simple Either charge up to £4250 "rent" with bills on top, or a total of £4250 rent, but don't require the lodger to pay extra for bills.

Generally, it's very difficult to apportion bills to a lodger - how much gas, electricity etc do they actually consume? So just call it £4250 rent, to include certain bills (the ones you can't apportion) but insist that they pay their own share of the phone bill.

I don't do a fixed amount for bills as I have found in the past it just encourages people to have heating on all the time, tumble-dry clothes etc. I just take meter readings whenever someone moves in or out and periodically in between and then every 2/3 months or so calculate the cost. It's easy to do and takes minutes (I used to do the gas properly using all the conversion calculations etc but now I don't bother ,I just use the last bill and a calculator to find out the amount paid per unit which is close enough) I have it all in a folder and can tell prospective lodgers the average amounts for winter/summer so they can budget. (obviously the OP won't have this data yet)

That way it doesn't matter when people move in/out as I can easily calculate exactly what they owe at any time and it also doesn't matter when I get estimated bills as i charge lodgers according to the actual meter readings.

I can understand people preferring to just charge a fixed amount but I prefer a few mins work every few months and then not to have to think about how much heating/etc is being used as they will at least be paying for 1/2 of it.