Tax question on rental income

m1ntie

Hi, I have for the past 8 years let out a couple of rooms in my house and declared the income on SA, using the Rent a Room Scheme.

Last September, I moved in with my partner and decided to let the house on a short hold tenancy agreement, as I was unable to sell due to a proposed new Motorway Junction blighting the property.

I am now thinking about my tax return for the 2014/15 tax year, and am not sure how to proceed, as I had approx 6 months as an owner occupier with lodgers and 6 months as a SHT.

I think I will have to prepare accounts for the whole year, but how do I treat the house expenses for the period that I was living at the property? Do I apportion a percentage of the household running costs, such as heating, Council Tax etc, as allowable expenses. Do I need an accountant? I would be grateful for any suggestions.

Regards Robert

G_M

No idea whether you can seperate the two 'businesses': claim the rent a room scheme for the lodger income and just declare the tenancy income (less expenses) for the latter period.

If you don't get a knowlegable answer here, I'd ring HMRC and pose the hypethetical question.......

m1ntie

Thanks G_M

anselld

You dont need to apportion. You just need to choose which method to use. You can still claim the RaR allowance even though you were not resident for a full year, but then you cannot claim any other expenses. Or you can claim expenses for the whole year but not RaR.

http://www.hmrc.gov.uk/manuals/pimmanual/PIM4010.htm#IDAIEXRG

jjlandlord

The rent a room scheme only applies to income from a lodger, so OP cannot lump all of the income of the year as one.
He had income from a lodger, for which the rent a room scheme can apply.
In addition, and separately, he had income from letting property, for which the rent a room scheme does not apply and for which he can claim for allowable expenses.

G_M

As jj says, and hence I referred to 'two businesses'.

The issue is whether he can use half the annual RAR scheme allowance for 6 months (for simplicity), and then declare tellting income and allowances for the 2nd 6 months...

I suspect you'd need to enter ALL income (from both lodger and tenant) for the year on SA form, and then claim allowances, but as I said, ring HMRC.

jjlandlord

G_M wrote: »

The issue is whether he can use half the annual RAR scheme allowance for 6 months (for simplicity), and then declare tellting income and allowances for the 2nd 6 months...

It's not a question of 6 months here and 6 months there:

There is the income from lodgers over the whole year, with its set of rules.
In addition, there is the income from letting over the whole year, also with its set of rules.

It's just that the former accrued at the beginning of the year and the latter at the end of the year. However, that does not matter.

The whole RoR allowance can be claimed, but obviously only in relation to income from lodgers.

m1ntie

Thanks for the replies everyone.

m1ntie

Well, after several phone calls to the Revenue people I eventually spoke to a "Technical Officer" about this. It would appear that G_M was correct. I can apportion the Rent A Room allowance for the period that I had lodgers - 6th April - 25th September so 173 days.

£4250.00 divided by 365 = £11.643385 x 173 = £2014 RRA

The income and expenses for the subsequent Short Hold Tenancy
should be accounted for in the usual way.

Thanks

jjlandlord

So if I have lodgers only part of the year, I need to apportion the allowance? This does not make sense.

Now, it probably does not matter as long as the income from lodgers in any case below the threshold.

However, let's say I have a lodger for 1 month and I charge her £2000. In my view there is no tax to pay because £2000 is the income for the year and is below the annual threshold.
With apportionment the allowance for the month would only be about £350 and I would have to pay tax on the rest.

As you have been advised that you could apportion, I would only do it if that resulted in less tax.

Guest101

Agreed with JJ it makes no sense.

The problem with speaking with someone is, you speak to their colleague and get a different answer.