Sub-tenant refuses to pay rent

00ec25

theartfullodger wrote: »

Nope, that's not how rent a room works: IF TOTAL rent income pa is less that £7,500 nothing needs declaring.
Otherwise, declare the lot: Income £16,320: Less valid ( VALID ! ) expenses, and HMRC can inspect/audit to make sure we're all honest.

I suggest you read the rules before you lecture others on how tax works given what I wrote is PRECISELY HOW IT WORKS (or else you stick to your usual inane comments)

there 2 ways RAR works:
1. if income is less than allowance then there is no tax to pay and nothing to declare because that is what the allowance is for. But that does not apply in Op's case given 680pcm, so the certainty that 12 months of 1, or 6 months of 2 lodgers will exceed RAR allowance.

2. if income > allowance you can choose to use RAR and pay tax on the excess

If you choose not to use RAR in option 2 then you use the normal method, which has no relevance to RAR as it is the normal method.

for some reason you appear not to understand point 2, try educating yourself before telling people they are wrong in future: https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4001

zagubov

OP, as I mentioned earlier, you landlord has a very simple arrangement, with very little for him to do. but you seem to be thinking you're just acting as rent-collected for him.

It's more complicated than that. The money coming to you is going to look like income even if you then forward it to your landlord. The tax authorities could tax this twice (once when you receive it and a second time when the landlord receives it) and would exercise the right to do so.

This means your lodgers need to pay more to cover your future tax payments (or you will be short of money for the rent you give your LL) and you need to fill in a tax return if you don't do so already.

You could arrange for your lodgers to pay your landlord directly by standing order, so the money doesn't pass through your hands. That's complicated though because the tax people might not believe you (and it's not in thier financial interests to do so).
Plus this may affect the lodgers tenure - they can only be your lodgers, not the landlord's, as he doesn't live there.

You need to sort this out before you earn more than your £7.5k limit this tax year.
Which will probably happen in about a months time.

One lodger's leaving so make sure the replacement knows the increased rate.

The other existing lodger will be facing an eye-watering increase (probably about 10%), but if he doesn't accept it, you need to give notice and get someone in at the new rate.

And stop referring to them as sub-tenants; you're digging a deeper hole for yourself every time you use that term.

Lokolo

00ec25 wrote: »

I suggest you read the rules before you lecture others on how tax works given what I wrote is PRECISELY HOW IT WORKS (or else you stick to your usual inane comments)

there 2 ways RAR works:
1. if income is less than allowance then there is no tax to pay and nothing to declare because that is what the allowance is for. But that does not apply in Op's case given 680pcm, so the certainty that 12 months of 1, or 6 months of 2 lodgers will exceed RAR allowance.

2. if income > allowance you can choose to use RAR and pay tax on the excess

If you choose not to use RAR in option 2 then you use the normal method, which has no relevance to RAR as it is the normal method.

for some reason you appear not to understand point 2, try educating yourself before telling people they are wrong in future: https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4001

To be fair to artful, it did use to be the case that if you earned more than the allowance, you couldn't use the scheme and you had to do exactly what artful has said.

I was still under the impression this was the case until you pointed it out.

https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme

You must complete a tax return if you earn more than the threshold. From 6 April 2016, this is £7,500. For the 2015 to 2016 tax year, the threshold was £4,250.

You can then opt into the scheme and claim your tax-free allowance. You do this on your tax return.

theartfullodger

00ec25 wrote: »

I suggest you read the rules before you lecture others on how tax works given what I wrote is PRECISELY HOW IT WORKS (or else you stick to your usual inane comments)

there 2 ways RAR works:
1. if income is less than allowance then there is no tax to pay and nothing to declare because that is what the allowance is for. But that does not apply in Op's case given 680pcm, so the certainty that 12 months of 1, or 6 months of 2 lodgers will exceed RAR allowance.

2. if income > allowance you can choose to use RAR and pay tax on the excess

If you choose not to use RAR in option 2 then you use the normal method, which has no relevance to RAR as it is the normal method.

for some reason you appear not to understand point 2, try educating yourself before telling people they are wrong in future: https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4001

Thank you so much for your kind words.


Surely CAN work, rather than HOW ?

00ec25

Lokolo wrote: »

To be fair to artful, it did use to be the case that if you earned more than the allowance, you couldn't use the scheme and you had to do exactly what artful has said.

when was that then?

1992/93 when it started?
1997/98 when the allowance increased to £4,250?
up to 2005?

or, has it always worked that way? I await your evidence....

Comms69

00ec25 wrote: »

when was that then?

1992/93 when it started?
1997/98 when the allowance increased to £4,250?
up to 2005?

or, has it always worked that way? I await your evidence....

I will say that I thought it worked that way too, until the 2015* increase.

Might be wrong, fair enough

00ec25

Comms69 wrote: »

I will say that I thought it worked that way too, until the 2015* increase.

Might be wrong, fair enough

in tax year speak you mean 7,500 wef 16/17

it has always had the excess option since it is what it is, a tax free allowance. It has worked that way since 92/93. You pay tax on the excess over the allowance (or you use the normal method). It was a common exam question of its day since it meant income tax answers had to remember to allow a tax free amount in excess of the personal allowance when arriving at the final total to pay.

Legislation
The rent-a-room scheme was introduced by Finance (No2) Act 1992. Back in those days, the excess calculation was referred to as A - B see schedule 10 para 11 (2)
http://www.legislation.gov.uk/ukpga/1992/48/schedule/10

when the schedule basis of income tax was repealed in 2005, income tax legislation was consolidated in the Income Tax (Trading and Other Income) Act 2005. ITTOIA05 Part 7 chapter 1 remains to this day the narrative description of the mechanics of the calculation, s797 (4) (a) is the line you want
https://www.legislation.gov.uk/ukpga/2005/5/part/7/chapter/1

00ec25

theartfullodger wrote: »

Nope, that's not how rent a room works

theartfullodger wrote: »

Surely CAN work, rather than HOW ?

Nope. That is exactly how it works.

Would you care to rephrase you comment?