Do bills effect the tax threshold for rent a room

loki20

Hello,

We are about to buy our first flat and plan on renting out a room to a friend. Our plan was to rent out the room at £350pcm to be below the tax threshold of £4250 under the rent a room scheme. I was wondering however whether that tax threshold includes any payments towards bills e.g. gas/electricity/internet etc.

Also, on the Gov.uk website, it says that the tax threshold is £2125 if letting jointly. I'm assuming that this is £2125 each?

Any advice would be greatly appreciated.

Thanks

System

It will be the total income received for the use of that room in your flat so will include gas, electricity etc

You'd be lucky to rent a room and then expect the lodger to pay on top for basic utilities

https://www.gov.uk/rent-room-in-your-home/rent-bills-and-tax

loki20

I see, so when renting out to lodgers the done thing is to have a set rent which is inclusive of all bills?

System

That's normally the case. The only extra a lodger is normally looking for is their food.

Internet? Unless their usage means that you have to increase the package then you will be paying it anyway so I don't see how you would be able to include a cost for this.

loki20

Ok thanks,

Basically we're currently renting with friends where we split the bills between all tenants. When we move, we will own the house, but we thought the principle would remain the same, i.e. we're renting out one room to a friend and we'd all split the bills. It's fine for us to work out the estimated cost of bills and add that to the rent, but I was still in the mindset of sharing a house.

Kynthia

As mugwup says, all income including contributions to bills are included in the rent a room tax free allowance. Also it's easier to give a lodger a set rate than trying to get extra monies from them every time a bill comes in.

BitterAndTwisted

Whenever I had a lodger I always charged them a monthly rent plus a half-share of the utility bills. That way, you are discouraging them from having the heating on full-blast 24/7 as soon as your back is turned.

I expect many people receive a bit more than the RAR maximum and don't declare it.