Rent a room - exceeding 7500

michaels

WE currently rent a room on a board and lodgings basis and receive less than 7.5k so are able to just not declare it for tax purposes.

WE have the possibility of increasing this to 10k but then we have 2.5k of taxable income which although below the income tax threshold for my wife will impact our benefits entitlement.

Is there any way around this - could we declare that the 2.5k relates to expenses (it does) and thus only 7.5k should come under rent a room? Would it make sense to register as a small business and then perhaps all the 'profit' after expenses could be paid into a pension rather than as income?

Thanks

BoGoF

No....you either claim the exempt amount or actual expenses....not both.

trailingspouse

If you're earning more than £7,500 then the Rent-a-room scheme doesn't apply to you.

00ec25

michaels wrote: »

WE currently rent a room on a board and lodgings basis and receive less than 7.5k so are able to just not declare it for tax purposes.

WE have the possibility of increasing this to 10k but then we have 2.5k of taxable income which although below the income tax threshold for my wife will impact our benefits entitlement.

Is there any way around this - could we declare that the 2.5k relates to expenses (it does) and thus only 7.5k should come under rent a room? Would it make sense to register as a small business and then perhaps all the 'profit' after expenses could be paid into a pension rather than as income?

Thanks

So you claim "benefits" and you want advice on how to fiddle your taxes? Wonderful start to a thread.

- You state "we". I assume you are legally married?
- I assume you both own the property?

That means the rental income must be split between the two of you 50/50 so each person gets half the allowance: £3,750 each.

You cannot say "all" of it is hers if each of you is an owner and therefore has entitlement to a share of rent.

Do you actually understand what the rent a room allowance is? By definition it is a tax free amount in lieu of claiming expenses. Patently therefore no you cannot class the excess as "expenses" since you cannot claim any expenses at all if you claim the allowance.

What do you mean by "board and lodging"?
Are you in fact operating a bed & breakfast "business"? If yes, there are other (tax legal) options, for example, yes, profits would be "relevant earnings" for pension purposes.

Given the nature of your questions you know enough to risk getting things rather wrong so go take professional advice... you can afford it from your benefits.

michaels

The share of rent a room income to each partner presumably depends on how the ownership of the property is structured (joint tenants, tenants in common, ownership shares etc)

Rent a room scheme income is not assessed when calculating benefits, nor are pension contributions. Write to your mp if you think the law should be changed.

Thank you to the posters for confirming that you can not combine the rent a room relief with deducting expenses when offering board and lodgings.

00ec25

michaels wrote: »

The share of rent a room income to each partner presumably depends on how the ownership of the property is structured (joint tenants, tenants in common, ownership shares etc.

no it does not, it is by owner headcount, so (I assume) 50/50 in your case


I suggest you read the manual
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4000

michaels

00ec25 wrote: »

no it does not, it is by owner headcount, so (I assume) 50/50 in your case


I suggest you read the manual
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4000

Not disagreeing, just surprised as it is not unusual for a property to be owned by only one of the couple who live there so it seems strange that the person with no ownership would still be assessed as earning a share of the lodger income.

00ec25

michaels wrote: »

Not disagreeing, just surprised as it is not unusual for a property to be owned by only one of the couple who live there so it seems strange that the person with no ownership would still be assessed as earning a share of the lodger income.

if you read the manual before commenting you would understand