Rent A Room Scheme

katejo

msralmjs wrote: »

I'm no expert but if you're on a low income perhaps you could talk to a tax expert about if there's any way you can recover tax through PAYE. Don't jnow if you can, but that might be the better avenue to explore.

You might also, frankly, want to think about whether the current place you have is too big and if the net income you receive from the rent outweighs additional costs for living in a larger property.

re. my recent payment: HMRC assumed that I would want to pay it through PAYE. I opted out of this, partly because my excess amount is likely to differ from 1 year to another as I often have gaps when the lodger leaves.

G_M

Apportionment

If part of the property is occupied by the landlord and part is let, an appropriate proportion of the rent may be allowed. A similar apportionment should be made of any ground rent, rent- charge, ground annual or feu duty.

For full allowance information see HMRC handbook:


PIM2000 - Deductions: general rules: contents


PIM2005 Introduction
PIM2010 Applying the wholly & exclusively rule
PIM2020 Repairs
PIM2025 Rent paid out
PIM2030 Rates and council tax
PIM2040 Insurance premiums
PIM2050 Main types of expense

katejo

G_M wrote: »

Apportionment

For full allowance information see HMRC handbook:


PIM2000 - Deductions: general rules: contents


PIM2005 Introduction
PIM2010 Applying the wholly & exclusively rule
PIM2020 Repairs
PIM2025 Rent paid out
PIM2030 Rates and council tax
PIM2040 Insurance premiums
PIM2050 Main types of expense

Isn't that referring to a self contained unit (like a bedsit with its own private door) for which RAR can't be used anyway?

G_M

katejo wrote: »

Isn't that referring to a self contained unit (like a bedsit with its own private door) for which RAR can't be used anyway?

As my post quoted:

If part of the property is occupied by the landlord and part is let,.....

See also

Who carries on a rental business?

Any person or body of persons carries on a rental business if:

• they own or have an interest in land or property in the UK; and
• they enter into transactions that produce rents or other receipts liable to IT or CT from that land or property.

(my emphasis)

kinger101

katejo wrote: »

It would however save the time and money (phone bill) wasted on trying to ring the tax office to declare just 1 small excess over the RAR :rotfl: I got a higher phone bill last month due to being kept on hold for an extended period.

Why didn't you just complete the self assessment tax return?

Kynthia

booksurr wrote: »

not quite:
- an apportionment of the rent between the business use (the space let) and the non business use (space occupied by OP) is perfectly acceptable. Just the same as apportioning the mortgage interest is acceptable. The key is the tax law specification of "wholly and exclusively" business related. The rent related to the let space is thus business related - this is why accountants know how to apportion costs based on having studied tax law!

- the cost of furnishing would be a capital item

A blip on my part mentioning the cost of furnishing, although I presume soft furnishings like curtains and bedding would unlikely to be capital? How particular would the HMRC be on the fixed assets definition of 'long term use' when it comes to these types of things as it's clearer with bigger and more expensive assets?

notional

Thanks for all the suggestions and debate so far. Can I just interject to say:
- I am a she not a he
- Hold times to call HMRC are around 60 minutes at the moment, otherwise I would have gladly called them up about this before bothering people on this forum
- As per the helpful information on Apportionment, I have made a sample calculation based on sharing my rent and fixed expenses on the flat 50/50, based on the floor area occupied, and adding a sum spent on a mattress, and it does not come out as worth it to opt out of the RAR scheme. For people with two lodgers, I would think it would start to become more worth it.
- HMRC are presumably raising the threshold next year for precisely this reason, so they don't have to deal with fiddly little customers with their receipts for mattresses and gas and whatnot. What surprises me is that there don't seem to be any links to the PIM2005 Manual in any of the HMRC or Gov.uk information about Rent a Room. How people are supposed to decide I don't know. Well they can look at this thread now I guess!

katejo

kinger101 wrote: »

Why didn't you just complete the self assessment tax return?

Because i was told that it wasn't needed if I had nothing else to declare.

HappyMJ

notional wrote: »

Thanks for all the suggestions and debate so far. Can I just interject to say:
- I am a she not a he
- Hold times to call HMRC are around 60 minutes at the moment, otherwise I would have gladly called them up about this before bothering people on this forum
- As per the helpful information on Apportionment, I have made a sample calculation based on sharing my rent and fixed expenses on the flat 50/50, based on the floor area occupied, and adding a sum spent on a mattress, and it does not come out as worth it to opt out of the RAR scheme. For people with two lodgers, I would think it would start to become more worth it.
- HMRC are presumably raising the threshold next year for precisely this reason, so they don't have to deal with fiddly little customers with their receipts for mattresses and gas and whatnot. What surprises me is that there don't seem to be any links to the PIM2005 Manual in any of the HMRC or Gov.uk information about Rent a Room. How people are supposed to decide I don't know. Well they can look at this thread now I guess!

You can't split the rent and expenses 50/50 and claim 50% of your rent as an expense against the rental income you get from letting out the room. It could never be 50/50. You have to measure the room and compare that to the total floor area of the whole flat/house. It might be 20% it might be 30% but it will never be 50%. Be very careful with that one as it can catch a lot out. It's supposed to be the "extra" expense of having a lodger. You don't claim what you would have spent had you had a property big enough for your needs in the first place. Your gas/electric and water bills will not be double had you lived alone they'll just go up by a little bit and it's only that extra little bit you can claim as an expense and claiming based on floor area is a method you can use.

gazter

Guest101 wrote: »

You want help evading tax?! Sorry not going to happen.

Pay what you owe.

Just to clarify

1: you don't need remission to get a lodger.
2: the expenses to offset against do not include the roof over YOUR head.
3: the tax you would owe is likely to be in the low £100 mark. Why are you so desperate to avoid such a small amount?!

Doesnt sound like they want to 'evade tax', they want to avoid it. Avoiding paying tax is something we all do. They want to weigh up the rent a room vs setting against expenses and see which is the most tax efficient.

I dont see anything in the least bit morally wrong. We all arrange our affairs in a tax efficient way. Whether that is by the choice of fuel we put in our car, contributions to a pension, or even buying a cooled down cooked chicken from the supermarket instead of one on the hot plate.

Some people really have a warped set of values.