Tax Free Amounts? I'm Confused.

billybusby

I'm on Carers Allowance, my partner has PIP (around £560 a month). I have just started to work part-time online from home and I get commission which works out between £600-£800 a month. We are living together as a couple. We are looking to rent a room out in our house via the rent a room scheme. My partner works on a social media account for a company for £150 a month. Have been off all benefits now for a few months. Both registered now as self employed.

How much of that would be tax free in total? Please be gentle. I have ADHD and dyslexia so am trying really hard to get my head around it.

00ec25

carers allowance (£64.60 per week) is taxable so counts towards your total income
https://www.carersuk.org/help-and-advice/financial-support/help-with-benefits/carers-allowance
obviously your self employed income is taxable, but you need to work out how much profit you make. Don't you have any expenses to deduct from that commission?
so potentially your income is 3,359 carer and (assume all profit) 9,600 commission. Total 12,959, the tax free allowance is 11,850 so 1,109 would be taxable and cost you around £221 per year in tax.

PIP is non taxable, https://www.gov.uk/pip/what-youll-get
so her only taxable income is 150 per mth which is obviously way below the tax free allowance so she won't pay tax


living together means nothing in tax terms. Crucially, is she a co-owner of the property with you, or is it just in your / her name as sole owner?

if jointly owned and you claim the rent a room allowance then provided the rent is less than £625 per month neither you nor her will have to pay any tax on it at all since it is below the £7,500 tax free rent a room allowance. That allowance is given on top of your income tax allowance so is not affected by any earnings you get

if joint owned then the allowance is split in half so 3750 each but the assumption then is also that the rental income must be split in half. So having a lodger would only affect tax if you charge more than 625 rent per month and it would really only impact you since you're the only taxpayer.

In such a case suppose you charged £800 per month , total £9,600 per year rent, so 4,800 each. Deduct the rent a room allowance 3750 (ie 7500/2) and you are left with 1050 taxable rent

add that to your other income 12,959 +1050 and your taxable income would be 14.009 - 11850 = 2,159. Tax on 2159 would be £431 per year

now go and play with your own rental numbers...

dori2o

billybusby wrote: »

I'm on Carers Allowance, my partner has PIP (around £560 a month). I have just started to work part-time online from home and I get commission which works out between £600-£800 a month. We are living together as a couple. We are looking to rent a room out in our house via the rent a room scheme. My partner works on a social media account for a company for £150 a month. Have been off all benefits now for a few months. Both registered now as self employed.

How much of that would be tax free in total? Please be gentle. I have ADHD and dyslexia so am trying really hard to get my head around it.

00ec25 is correct in what hey say, except for Carers Allowance.

Carers allowance is taxable (£3359 per year in 18/19).

PIP is non-taxable, and is not income related so you can earn as much as you want whilst receiving it.

Both yours and your partners earnings are taxable.

Rent a room will be taxable if in excess of the exemption (£7500)

You both have a tax free allowance of £11850, but if necessary your partner (assuming you are married or n civil partnership) could elect to transfer 1190 of their tax free allowance to you.

If your income is £800 per month then thats £9600.

Remember that you MUST be providing at least 35 hours of care per week, although these can be at any time of day/night so if you live together this should be easily achieved, however your earnings may be a problem as you cannot earn over £120 (net, i.e. after tax/NI/expenses) per week and still receive CA.

That means on an income on £9600 you would lose carers allowance as there would be no tax due (as your Personal Allowance is £11850) and NI would be about £12 per week giving a weekly income of approx £172.

The rent a room relief is £7500, equivalent to £625 per month. As long as the rent you charge is less than this then there will be no tax to pay.

Your partner would ave no tax to pay.

00ec25

00ec25 wrote: »

carers allowance (£64.60 per week) is taxable so counts towards your total income
https://www.carersuk.org/help-and-advice/financial-support/help-with-benefits/carers-allowance

dori2o wrote: »

00ec25 is correct in what hey say, except for Carers Allowance.

Carers allowance is taxable (£3359 per year in 18/19).

so that would be the bit where I said carer's allowance is taxable then ? :cool: :rotfl:

dori2o

00ec25 wrote: »

so that would be the bit where I said carer's allowance is taxable then ? :cool: :rotfl:

I meant the bit about CA being means tested.

If the OP earns over £120 p. w net then they will lose eligibility for it.