rent a room scheme

miss_perelman

hello

what is the tax free threshold for renting a room cyrrently? does anyone know?

also, does it cover a landlord if s/he rents out 2 rooms to one person? or is it jut a one room deal in a house?

would it help a landlord avoid some of the capital gains tax as and when he came to sell his house or is it not linked in any way? many thanks

BitterAndTwisted

I believe that the threshold is £4250 per annum total income regardless of the number of lodgers or the number of rooms.

Where the owner is resident, taking in a lodger or two has no impact on CGT

miss_perelman

thankyou very much. my potential landlord says i can only live there for a year as anything over that will mean he'll be bashed by capital gains tax when he eventually sells the property, as any mnore rent paid to him will take him over the letting relief threshold. (i think that is what he said). i could pay him £15000 a year for the floor of his house. he pays 40% tax so £6,177 or thereabouts is 40% of that.

he is a friend and i wanted to try to persuade him to let us live there longer as i have a baby and need to pay council tax in one place for a substantial amount of time, for schools admissions purposes.

i am - annoyingly (for myself) - getting confused as to what argument i need to put to him to persuade him to let us live there longer. i am so tired of instability of renting!

could you possibly help me with a clear and pithy few bullet points to put to him. he is a friend but is also very very hard in business. !!

1000 thanks in advance

miss_perelman

o, p.s. his home is worth 1.3 million now and he is going on the premise that it will go up by 10% every year from now. this information might help you but has just served to confuse me further!!

nidO

If you are the only lodger he has, and you are a lodger rather than a tenant (ie you're living in 1/2/3 rooms etc and have a license to occupy them, rather than having a self-contained section of the property which is let to you for your exclusive use) then he will have no CGT consequences.

This is because Private Residence Relief allows for a maximum of 1 lodger to keep the full relief, it is only if he is letting part of the property to you or has more than 1 lodger then the relevant section of the house for the relevant amount of time will not quality for residence relief, but may instead fall under letting relief (which may or may not offset the entire CGT liability).

BitterAndTwisted

If you were to become this friend's lodger you would not have a Council Tax bill in your own name to pay, so this would not get you anywhere with regard to a school's catchment area.

As I said before, you becoming his lodger will have absolutely no effect on GCT if what you are renting from him is part of his own home with shared facilities like a bathroom and a kitchen. If it's a separate flat within the building with a separate access then you would not be a lodger at all but a tenant with your own Council Tax bill.

I can't comment on his tax-affairs and have no idea where he's got this "one year only" deadline from.

00ec25

miss_perelman wrote: »

i could pay him £15000 a year for the floor of his house.

that makes it sound like you will have exclusive use of the floor and will therefore be a tenant not a lodger. You need to be a tenant anyway to get a council tax bill in your name, you cannot as a lodger.

if you are a lodger , ie you share a kitchen and bathroom with the LL and he has right of access to your room, then he will never have to pay CGT since that only applies where there are 2 or more lodgers

if you are a tenant then the LL will face a CGT liability but without knowing how long he has owned the property and how long he has lived in it as his main home no one can tell you what his CGT position will be since the letting relief fraction depends (in part) on that information

G_M

rental income is unconnected with capital gains tax, though does affect income tax.

It would help if you were more specific about the set-up where you will be living:

* will your landlord live in the same property?
* share facilities/space?
* use same front door?

Once you have established if you will be a tenant, or a lodger, it is easier to advise on your liabilities and rights (and those of the landlord.

See also:

LODGERS (Licencees/Excluded Occupiers)
A lodger (broadly) lives in the same property with their resident landlord, and shares facilities. Unlike tenants, lodgers have few rights.

The Housing Act 1988 provides definitions of 'Resident Landlord' and 'same property'.

There is advice for landlords considering taking in lodgers here:

LodgerLandlord (General information site)

Landlordzone (General advice on taking in lodgers)

Renting out rooms in your home (Government info)

Rent a Room Scheme (Government scheme for tax-free income from lodgers)

camptownraces

miss_perelman wrote: »

as i have a baby and need to pay council tax in one place for a substantial amount of time, for schools admissions purposes.

No. I think there is some confusion here.
For school admissions, you will have to demonstrate where you live and how long you have been there. You don't have to show that you have a council tax demand in your own name. You could show a tenancy agreement, or that you are on the register of electors.

Isn't it rather early to be thinking about school admission for a baby?

miss_perelman

no!not in london! you have to think about primary school admissions "when you miss your first period" i was told by one state school admissions office manager. thankyou all. i have only just found this thread as i lost it. how are you supposed to find your old threads? there is no "threads i started" button, or similar. i will respond to all in a moment.

miss_perelman

to OOec25
re if you are a tenant then the LL will face a CGT liability but without knowing how long he has owned the property and how long he has lived in it as his main home no one can tell you what his CGT position will be since the letting relief fraction depends (in part) on that information

he has owned and lived in the property for about 7 years.