What should I take care of before renting rooms in my house?

randd

Hello,

I've recently moved in my new house that I've got under help to buy equity loan scheme with the help of government. My family will be coming next year and I was wondering it will be a good idea to rent spare 2 rooms (double, single) till then. I understand that I'll need to inform my mortgage lender about this and I'll then become a resident landlord as I'll also live in the same house.

In my search I came to know about uk room tax that is to pay tax only after rental income is greater than £7500 a year. Does this apply to single room or both the rooms i.e. sum of rents from both should be less then or equal to £7500 to avoid paying any tax?

What are any other legal issues that I should be aware of before giving rooms on rent?

It will be good to know about any experiences as I've never done this before.

Thanks

G_M

You don't need to tell your mortgage lender if you take in a lodger.

Tenant - that's a different ball-game.

LODGERS (Licencees/Excluded Occupiers)
A lodger (broadly) lives in the same property with a resident landlord & shares facilities. Unlike tenants, lodgers have few rights.

The Housing Act 1988 provides definitions of 'Resident Landlord' & 'same property' (S31 & Schedule 1 (10).

See:

LodgerLandlord (21 tips from solicitor Tessa Shepperson + General information site)

Landlordzone (Various articles on taking in lodgers)

Renting out rooms in your home (Government info)

Rent a Room Scheme (HMRC guide for tax-free income from lodgers)

randd

Hello G_M,

Thanks for you reply. I'm going through the links you have mentioned.

I've following questions regarding Rent a room scheme:

- how do one actually apply for this scheme i.e. is there any registration process?
- can someone apply for this scheme after having lodgers in the house?
- does this £7500 tax free money needs to be rents (12 months) only OR after deducting all the shared bills like water, gas, electricity, internet, etc.? Based on my reading, I think any maintenance expenses cannot be claimed. Please correct me, if I'm wrong.

Thanks

moneyistooshorttomention

- Have a lock on your bedroom door (and use it...)

- Make sure you have an itemised phonebill. Thankfully these days it's possible to have a tariff that includes free local phonecalls of up to 1 hour in length. However, still handy to have a printed bill. I knew which were my own phonecalls when I did this - and I just worked out which phonecalls werent mine (ie must be the lodgers) and showed them the bill and told them how much they owed me from it. Of course - that's assuming they will be using your landline phone - as they might prefer to make all their calls on their mobile.

- Assuming you're a non-smoker - do NOT put "non smokers only" in the advert. Smokers will apply anyway and the vast majority of them will intend to smoke regardless.. In hindsight - I wouldnt have put that in my adverts - I would have just bought in a pack of cigarettes and an ashtray and offered them one when they came to see the room. If they took it - I wouldnt take them:). I would be looking for a "No thanks. I don't" response from them.

booksurr

randd wrote: »

- how do one actually apply for this scheme i.e. is there any registration process?
- can someone apply for this scheme after having lodgers in the house?

if your total income is <£7,500 you do not need to apply for the scheme. You only apply if your income is more than 7,500

where your total income is less than 7,500 you are automatically deemed to be within the scheme so neither you nor the Govt have to do any admin work in registering you on it - that is the whole point of the threshold, to avoid extra work

randd wrote: »

- does this £7500 tax free money needs to be rents (12 months) only OR after deducting all the shared bills like water, gas, electricity, internet, etc.? Based on my reading, I think any maintenance expenses cannot be claimed. Please correct me, if I'm wrong

the whole point of giving you a tax free amount is that NO COSTS CAN BE CLAIMED

the 7,500 is the TOTAL of ALL income you get excluding any costs you have paid. If you rent out 2 rooms then it is the total income you get from both rooms/lodgers, it is not an allowance per room or per lodger. It is the total amount of rent you received between 6th April one year and 5th April the following year (ie the tax year)

Guest101

randd wrote: »

Hello G_M,

Thanks for you reply. I'm going through the links you have mentioned.

I've following questions regarding Rent a room scheme:

- how do one actually apply for this scheme i.e. is there any registration process?
- can someone apply for this scheme after having lodgers in the house?
- does this £7500 tax free money needs to be rents (12 months) only OR after deducting all the shared bills like water, gas, electricity, internet, etc.? Based on my reading, I think any maintenance expenses cannot be claimed. Please correct me, if I'm wrong.

Thanks

The £7500 is the annual tax free income allowance from letting a room in your house.

That includes any payment towards bills

Its sensible to make a rent inclusive of bills

Guest101

moneyistooshorttomention wrote: »

- Have a lock on your bedroom door (and use it...)

- Make sure you have an itemised phonebill. Thankfully these days it's possible to have a tariff that includes free local phonecalls of up to 1 hour in length. However, still handy to have a printed bill. I knew which were my own phonecalls when I did this - and I just worked out which phonecalls werent mine (ie must be the lodgers) and showed them the bill and told them how much they owed me from it. Of course - that's assuming they will be using your landline phone - as they might prefer to make all their calls on their mobile.

- Assuming you're a non-smoker - do NOT put "non smokers only" in the advert. Smokers will apply anyway and the vast majority of them will intend to smoke regardless.. In hindsight - I wouldnt have put that in my adverts - I would have just bought in a pack of cigarettes and an ashtray and offered them one when they came to see the room. If they took it - I wouldnt take them:). I would be looking for a "No thanks. I don't" response from them.

Many smoke outside these days

G_M

booksurr wrote: »

It is the total amount of[STRIKE] rent [/STRIKE]income you received between 6th April one year and 5th April the following year (ie the tax year)

OP - have you read the link?


Rent a Room Scheme (HMRC guide for tax-free income from lodgers)

booksurr

G_M wrote: »

You [STRIKE]don't[/STRIKE] may need to tell your mortgage lender if you take in a lodger.

some lenders do require to be notified if you take in a lodger and they state in their terms & conditions that you need their permission to do so

see...
https://forums.moneysavingexpert.com/discussion/5535620

randd

Thanks for explaining in detail. I've clear understanding now that £7500 allowance is not per room or per lodger.

booksurr wrote: »

the 7,500 is the TOTAL of ALL income you get excluding any costs you have paid.

However, based on your suggestion above, say suppose if my total rental income in year is £8000 and I've paid let's day £1000 for all the shared bills in that year. Then, can I deduct both the amounts to show my income as £7000, and therefore, it is under tax-free allowance? Sorry, but this isn't clear to me.

randd

Yes, I've just finished reading this content.