Rent a Room Scheme - Allowable Expenses

dantm123

Hi,

If I was using the Rent a room scheme with tenants in my home, would buying things like a vacuum, which would be used by both me (the resident landlord) and the tennant, count as an allowable expense. I read that it must be "wholly and exclusively for the purposes of renting out the property", but that wasn't in the context of the Rent a room scheme.

Secondly, would the same rules apply for something like a thermostat? What about installing solar panels?

G_M

If you have a tenant (2 'n's, not 3), you cannot use the Rent a room scheme.


(assuming Eng/Wales)

FreeBear

If you are a live in landlord, then they would be lodgers, not tenants. As I understand the "rent a room" scheme, you are allowed up to £7,500 per year income without having to pay tax and can not claim "expenses" against it.


If you are not living in the same property, then the lodgers would probably be classed as tenants and you would not be able to use the "rent a room" scheme. In which case, the services of an accountant would be advisable.

dantm123

Just to clarify, I meant lodgers not tenants. I wasn't sure what the exact terminology was.

Am I right in thinking that if the allowable costs are above £7,500 in a given year, it's better to use that instead of the rent a room scheme £7.5k allowance?

If so, since a lot of stuff I'd buy for the house would also benefit me alongside benefiting the lodger, is that fine as long as the lodger can make use of those things?

00ec25

dantm123 wrote: »

Just to clarify, I meant lodgers not tenants. I wasn't sure what the exact terminology was.

Am I right in thinking that if the allowable costs are above £7,500 in a given year, it's better to use that instead of the rent a room scheme £7.5k allowance?

If so, since a lot of stuff I'd buy for the house would also benefit me alongside benefiting the lodger, is that fine as long as the lodger can make use of those things?

you are so far adrift in your understanding it is hard to know where to begin putting you right

go do a lot more reading is an obvious start
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4000

yes, if ALLOWABLE costs are >7,500 then obviously it is better to use the normal method

if you are a resident landlord with lodger(s) and you use the normal method then:
- costs must be split between business and private use
- capital costs are not allowable for income tax
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2020
- there are special rules around replacement of certain items
- mortgage INTEREST cost (if applic) must be dealt with correctly


there is a reason the rent a room scheme exists. It is to enable people like you to not have to be tax experts, because you do not need to know what you are doing if all you can do is deduct 7,500 from your income and pay tax on everything else over that

FreeBear

dantm123 wrote: »

If so, since a lot of stuff I'd buy for the house would also benefit me alongside benefiting the lodger, is that fine as long as the lodger can make use of those things?

Having a couple of lodgers myself under the "rent a room" scheme, anything I buy (e.g. a microwave) I consider a general household expense. My rental income falls well below the £7,500 limit, so don't see any point in complicating matters by trying to claim back expenditure.


As an aside, one of the duvets got damaged - My opinion is that the lodger caused the damage, so it is their responsibility to replace it.

Honeylife

dantm123 wrote: »

Hi,

If I was using the Rent a room scheme with tenants in my home, would buying things like a vacuum, which would be used by both me (the resident landlord) and the tennant, count as an allowable expense. I read that it must be "wholly and exclusively for the purposes of renting out the property", but that wasn't in the context of the Rent a room scheme.

Secondly, would the same rules apply for something like a thermostat? What about installing solar panels?

Perhaps you need to do a little more reading up/research on the rent a room scheme.
https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme

I have two student Lodgers under the rent a room scheme. However as I am in inner London I am well over the £7500 per annum. I employ an accountant, thats an allowable expenditure.

For Clarity:

Lodgers - Live in Landlord or Resident Landlord
Tenant - Live Out Landlord
Boarders - Live in Landlord who provides meals (extra tax allowance)

00ec25

Honeylife wrote: »

Perhaps you need to do a little more reading up/research on the rent a room scheme.
https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme

I have two student Lodgers under the rent a room scheme. However as I am in inner London I am well over the £7500 per annum. I employ an accountant, thats an allowable expenditure.

For Clarity:

Lodgers - Live in Landlord or Resident Landlord
Tenant - Live Out Landlord
Boarders - Live in Landlord who provides meals (extra tax allowance)

accountancy fees for calculating your personal tax return are NOT an allowable expense against the letting business. If your accountant has not split his bill between property profit calculation and personal tax return then he is so wrong he ought to be reported to his professional body

as you have 2 lodgers, don't forget you are now liable for capital gains tax when you sell
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64702
and if you sell after April 2020 you won't get letting relief any more

SuperHan

If the OP lives with the lodgers, then surely they will still get lettings relief (so potentially no CGT)..

theartfullodger

There are no allowable expenses with rent-a-room.

If you want to claim expenses you need to do full self-assessment including property section

trailingspouse

It's an either/or situation.


Either you use the Rent-a-room scheme (in which case you pay no tax on the first £7,500 of rental income and make no claims for tax relief on any related expenditure) or you don't (in which case you are taxed on your income but can also claim tax relief on expenditure). You can't have both.

However - you can swap in and out of the scheme year by year, depending on which is most favourable to you in any given tax year (for example if you had a high level of allowable expenditure one year, it might be wise not to avail of the Rent-a-room scheme so that you could get the tax relief).