Rent a Room Scheme

the_lunatic_is_in_my_head

Our house used to be 5 cottages and was knocked through many years ago, upstairs all 5 are knocked through, down stairs we have 3 knocked through leaving 2 on the end comprising of 4 rooms with their own front door accessed via our garden (same as the main front door to the rest of the house).

These rooms are currently empty shells but have some basics (electric and drainage mainly) and we are looking to do them up to have a bedroom, bathroom, kitchen and living space so when friends or family come to stay they can have their own private bit of the house.

What I'm after knowing if anyone can help is if these were let on a weekly basis (like a holiday let) during the summer for some extra income, does this kind of letting come under the Rent a Room Scheme please?

Bluebirdman_of_Alcathays

No - holiday lets have explicitly different tax treatment to Rent a Room. There is no allowance for a FHL - the profit goes onto your self assessment and is taxed at your marginal rate.

https://www.gov.uk/government/publications/furnished-holiday-lettings-hs253-self-assessment-helpsheet/hs253-furnished-holiday-lettings-2015

the_lunatic_is_in_my_head

Thank you, the link states:

Accommodation can only qualify as a FHL if it passes all 3 occupancy conditions.


....


Your property must be available for letting as furnished holiday accommodation letting for at least 210 days in the year

If your property does not qualify as an FHL or stops being a qualifying FHL, the special tax treatment will no longer apply.

But we wouldn't intent to let for that period over the year so where does that leave us please?

As a side question, if we let to one person over the summer (lot of seasonal workers here) I assume they'd be classed as a lodger, would the set up of our home count under the Rent a Room Scheme?

Bluebirdman_of_Alcathays

It is unlikely (although i can't tell from here) that they will qualify for Rent a Room from your info. The idea behind the RaR legislation is to assist those that take people into their home. From what you've said, this is not currently part of your house, it is self contained, it even has a separate entrance. Apologies if any of this is incorrect.

The guidance below states it can't be used if it isn't part of your main home when you let it.

As it isn't FHL or RoR, it is a bog standard let, and will be taxed accordingly - profit on your self assessment (without the special loss treatment that FHL get)

Apols if that is confusing I'm on mobile!

https://www.gov.uk/government/publications/rent-a-room-for-traders-hs223-self-assessment-helpsheet/dgh

the_lunatic_is_in_my_head

Thanks again, that's great, not being part of the main home was my concern as I couldn't find a clear definition , I wondered whether sharing the garden (and maybe having the upstairs above) would count as being part of the main home.

Equally would an internal door connecting the two (the 4 rooms to the rest of the house) make the space part of the main home, regardless of set up at any home a lodger typically wouldn't have access to every space in the house.

Guest101

What you're risking is giving the person tenants rights.


A lodger typically has access to (and shares) kitchen, dinging, living and bath rooms.

G_M

I've never shared my dinger with anyone Guest.

I ding in private thank you very much!

Guest101

G_M wrote: »

I've never shared my dinger with anyone Guest.

I ding in private thank you very much!

Your poor lodgers! I always enjoy sharing a good dinger!


(OP - Dining*)

the_lunatic_is_in_my_head

Guest101 wrote: »

What you're risking is giving the person tenants rights.


A lodger typically has access to (and shares) kitchen, dinging, living and bath rooms.

I guess we could have access to use their kitchen and living room but it devalues the proposition somewhat.

So if we went back to the original idea of a holiday let that doesn't meet the FHL requirements, we'd be liable for tax on the income minus the costs solely relating to the let which would be accounted for on self assessment?

My wife and I both own the house so I assume it's split 50/50 with regards to tax liability?

With capital gains, the space is 12% of the house, if we say lived here for 10 years and let it for 1 year over that time would we pay CGT on 1.2%?

Guest101

the_lunatic_is_in_my_head wrote: »

I guess we could have access to use their kitchen and living room but it devalues the proposition somewhat. (it's not that simple, if they are tenants, you really cant have access - you could be committing a criminal offence. The expectation should be that they have access to all communal areas)

So if we went back to the original idea of a holiday let that doesn't meet the FHL requirements, we'd be liable for tax on the income minus the costs solely relating to the let which would be accounted for on self assessment? - You'd also be liable to local business rates I believe. Holiday lets not my speciality.

My wife and I both own the house so I assume it's split 50/50 with regards to tax liability? - unless you own unequal shares?

With capital gains, the space is 12% of the house, if we say lived here for 10 years and let it for 1 year over that time would we pay CGT on 1.2%?

Sorry CGT definitely not my area

Bluebirdman_of_Alcathays

the_lunatic_is_in_my_head wrote: »

I guess we could have access to use their kitchen and living room but it devalues the proposition somewhat.

So if we went back to the original idea of a holiday let that doesn't meet the FHL requirements, we'd be liable for tax on the income minus the costs solely relating to the let which would be accounted for on self assessment?

My wife and I both own the house so I assume it's split 50/50 with regards to tax liability?

With capital gains, the space is 12% of the house, if we say lived here for 10 years and let it for 1 year over that time would we pay CGT on 1.2%?

Capital Gains is far too complex an area to get into now. There is PRR (if it were applicable), Letting Relief (if it were applicable), even Indexation Relief (god only knows if that were applicable!!!)

Don't allow the tax tail to wag the dog. If it's profitable - do it! There are few taxes over 100%, so if you're unsure, undertake the venture and sort out the tax later. It sounds like you could use an hour or two with a local accountant - do it.