Lodgers and Tax

knonist

£700 per month (ex any bills inc) or £8400 per year - which exceeded the
£4250 tax free allowance.


We both are basic rate tax payer (earning 26.5 K each) and I wonder we can each have
£4250 tax free allowance.

Also can I exclude bills from the lodgers and charge this seperately to avoid attracting extra tax?

Many thanks

Owain_Moneysaver

knonist wrote: »

Also can I exclude bills from the lodgers and charge this seperately to avoid attracting extra tax?

I don't know about claiming a double allowance under the Rent A Room Scheme.

However under Rent A Room Scheme all your income is taxable apart from the first £4250, whether it is charged to the lodger as 'rent' or 'bills'.

If you want to claim a proportion of your gas, electricity etc as expenses against taxable income, then you account for your income and expenses in the same way as a self-employed person -- and you can't then claim the £4250 tax-free allowance.

Owain_Moneysaver

knonist wrote: »

Also, do I have to include bills or I can charge seperately for the bills?

It doesn't matter under Rent-A-Room Scheme, but any money the lodgers give you (apart from the first £2125 or £4250) will be taxable.

In terms of council tax, if you set your rent to include it you protect yourself against the lodgers not paying it themselves, but you lose because you have to pay income tax on the council tax money you collect before you hand it to the council.

"bills included" does not encourage your lodgers to be economical with electricity etc.

System

And as a lodger I would walk away if bills were not included as part of the cost. As a lodger I would expect to pay the householder one single fixed amount per week/month that includes all costs.

ahomemadetouch

have you checked you can buy a 3 bed shared ownership property some areas only allow one more bedroom than you need e.g. a couple can apply for a 2 bed and a couple with a child can apply for a 3 bed