Costs of having a loder(s)?

Jenniefour

booksurr wrote: »

agreed

also OP needs to consider that with 2 (or more) lodgers then private residence relief is lost and OP becomes liable to capital gains tax upon sale. OP can however claim letting relief instead, but that is capped at £40,000

Are you sure about this? My reading of HMRC webste on this indicates clearly that you can have two lodgers under the scheme, and it becomes a HMO when there are three or more.

dominoman

Jenniefour wrote: »

Correct. And OP would still be quids in. Possibly needing to pay extra income tax is no good reason not to have one or two lodgers. If OP is a 20% tax payer and had two lodgers paying £300 pm each then that's an annual income of £7200. After the £4250 Rent a Room allowance is deducted that leaves £2950 taxable at 20%. So looking at a little less than £600 pa tax. Well worth doing. Still worth doing if income from two lodgers takes OP into a higher tax bracket on part of income.

If OP only had one lodger paying £300 pm then no is tax payable, regardless of OP's tax situation.

It depends what they pay for the house.

I read the OPs post as considering buying the house on the basis of taking in two lodgers. In that case the post-tax income for the spare rooms needs to be higher than the extra mortgage repayment for it to be worthwhile.

Jenniefour

dominoman wrote: »

It depends what they pay for the house.

I read the OPs post as considering buying the house on the basis of taking in two lodgers. In that case the post-tax income for the spare rooms needs to be higher than the extra mortgage repayment for it to be worthwhile.

I wasn't aware that you can count potential income from lodgers on a mortgage application. I would have thought that isn't possible.

Unlike a property bought on a Buy to Let mortgage where the potential rental return is taken into account.

MoMoneyMoProblem

I've just read through and I'll just post a summary of everything I missed out:

- I'll be buying it based on having no lodgers. The additional money is just a bonus.

- I'll be living there.

- It's in West Yorkshire.

- It's practically opposite the train station and a 10 minute train ride to Leeds.

- I've looked on spare room and around 310 seems about what people ask for in this area.

The only concern I have is this house is in an area that is not so great, but I'm thinking it's a nice way onto the ladder and it's a pretty huge house. I'd love to get an oppinion on that if anybody minds a private message with the zoopla listing.

gazter

MoMoneyMoProblem wrote: »

So I am looking at buying a home that has 2 double rooms that I could rent out but I'm not sure on the costs involved in regards to bills etc?

I know I will have to pay full council tax, but in terms of electricity, water and gas?

The house has central heating and is an old style terrace so the ceilings are quite tall.

I am thinking of putting the rooms out at ~300/month will bills included if I went ahead with this purchase!

If they are going to be working different shifts to you, you will find a significant increase. For a double room in a nice home you should be considering increasing that 350 to 500 depending on the area.

oldbaldman

What is HMRO?

If meant to state "HMO", don't think that this would apply here?

obm

MoMoneyMoProblem

gazter wrote: »

If they are going to be working different shifts to you, you will find a significant increase. For a double room in a nice home you should be considering increasing that 350 to 500 depending on the area.

It's a victorian stonebuilt terrace. I'm under the impression heating is a must due to potential damp anyways?

And 500 isn't realistic I don't think. Not here.

Jenniefour

oldbaldman wrote: »

What is HMRO?

If meant to state "HMO", don't think that this would apply here?

obm

Sorry, you're quite right. Should have been HMO - have edited my post.

With two lodgers couldn't be classed as HMO, so, no, wouldn't apply.

booksurr

Jenniefour wrote: »

Are you sure about this? My reading of HMRC webste on this indicates clearly that you can have two lodgers under the scheme, and it becomes a HMO when there are three or more.

yes I am absolutely sure since I was referring to CAPITAL GAINS TAX applicable when the property is subsequently sold, not to the income tax liability on the annual rent under RAR

HMO status has no impact at all on CGT or income tax (but will affect council tax liability) so I have no idea where you got the idea it is related to 3+ from

the RAR scheme has absolutely nothing whatsoever to do with HMO so you have indeed misread that. The number of lodgers you can have under RAR is limitless, although obviously once the total annual income from all of them added together as one figure exceeds £4,250 you must pay income tax on the excess (or choose instead to switch to the normal method if that is better tax wise)

gazter

MoMoneyMoProblem wrote: »

It's a victorian stonebuilt terrace. I'm under the impression heating is a must due to potential damp anyways?

And 500 isn't realistic I don't think. Not here.

Ive seen some dives, and stories of dives for people boarding. Are the rooms large? does the house feel homely, is there plenty of communal space that you can all relax in? Do you have parking (something you should mention if you do in your advert)?

Professionals working away from home will pay a premium for that. But, it all depends on the local marketplace as always.