Valid expenses when renting a room...

MarkyTe

Hi everyone,

I have a 2 bed flat which is mortgaged.

I use one bedroom and let the other to a lodger.
I’m completing my tax return and have 2 options:
1) 1) Use the ‘rent a room’ scheme and £7500 of the rent received is tax free but I can’t claim any expenses.
2) 2) Don’t use the ‘rent a room’ scheme and claim expenses against the rent received.


Let’s assume I choose option 2. My question then is:
If I weren’t living in the property and it were a buy-to-let, I could claim the mortgage interest as an expense, so...
As the property is effectively shared 50/50 with the lodger, can I claim 50% of the mortgage interest (i.e. the lodger’s share) as an expense?


I realise the tax laws on BTL mortgage interest change from next year but I’m just asking about this year for now.


Thanks in advance!

Jenniefour

Why make things hugely complicated? Use rent a room for tax purposes, you should be charging sufficient rent to more than cover expenses. No, you can't claim mortgage interest, it's your home, not a buy to let property.

MarkyTe

Thanks Jennyfour,
Half the mortgage interest + expenses would have come to more than the £7500 rent a room allowance, hence the question. I thought it might be deductible as other bills covered by me would be 50% deductible (as i understand it at least) but if that doesn't extend to the interest payments, you're right, it's best to go with the rent a room option.
Thanks again.

Comms69

MarkyTe wrote: »

Hi everyone,

I have a 2 bed flat which is mortgaged.

I use one bedroom and let the other to a lodger.
I’m completing my tax return and have 2 options:
1) 1) Use the ‘rent a room’ scheme and £7500 of the rent received is tax free but I can’t claim any expenses.
2) 2) Don’t use the ‘rent a room’ scheme and claim expenses against the rent received.


Let’s assume I choose option 2. My question then is:
If I weren’t living in the property and it were a buy-to-let, I could claim the mortgage interest as an expense, so...
As the property is effectively shared 50/50 with the lodger, can I claim 50% of the mortgage interest (i.e. the lodger’s share) as an expense?


I realise the tax laws on BTL mortgage interest change from next year but I’m just asking about this year for now.


Thanks in advance!

No, because the expense would be there with or without the lodger being present.


Expenses are in essence costs as a result of your 'business'.


Why not just use rent a room?

MarkyTe

When you put it like that, it makes perfect sense.
Filling in my return and using rent a room now!
Thanks very much

sheramber

Since your query is about income tax you would be better posting on the cutting tax board