Cutting tax on renting rooms

daveshow

Hello folks,

Been discussing a "dream" with the missus.

Basically in the near future we were looking at obtaining a large 6 bedroom house and leasing out some of the rooms.

The plan was perhaps 1 or 2 double rooms and 1 room as a hostel type with bunk beds.

Also perhaps looking to hire out bicycles, paddle boards and take people clay shooting as the area we are in would be very suited to all that.

But basically I do not believe in handing over the Government our hard earned cash if it can be helped

So I would like to look at all forms of tax relief to take advantage of.

So i would like to ask. If we gave up work how do we best tak advantage of the tax free earnings limit? Also the tax threshold of renting out rooms which I believe is currently about £7,500.

Could anyone advise on how to juggle things and what the maximum we could earn before tax has to be paid?

Can we both earn the tax free earnings limit and apply the 7,500 on top of that? Can we do 7,500 each some how? Can we use the £1,000 casual services allowance in anyway? Is the tax free allowance 7.5k in profit or total earnings?

Any and all advice appreciated

Many thanks

Dazed_and_C0nfused

Can we use the £1,000 casual services allowance in anyway? 

Have you just invented that?

Some light reading.  

https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/rent-a-room-scheme-letting-a-room-in-your-home-azk7l7f28wuz

But you may find it useful to get professional advice as you are referring to rent a room whilst simultaneously running a normal business.

Or are the people you are renting a room to you different to the ones you will provide other services to?

Jeremy535897

Dazed_and_C0nfused said:

Can we use the £1,000 casual services allowance in anyway? 

Have you just invented that?

Some light reading.  

https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/rent-a-room-scheme-letting-a-room-in-your-home-azk7l7f28wuz

But you may find it useful to get professional advice as you are referring to rent a room whilst simultaneously running a normal business.

Or are the people you are renting a room to you different to the ones you will provide other services to?

I suspect the reference to a casual services allowance is the use of the trading allowance against "casual income" which is earned income, but doesn't quite amount to self employment, and is returned in box 17 of SA100.

Rent a room relief applies to property income. It is described in more detail in https://www.gov.uk/government/publications/rent-a-room-for-traders-hs223-self-assessment-helpsheet/hs223-rent-a-room-scheme-2021

That explains that the £7,500 is divided between joint owners (£3,750 each). The property allowance is unlikely to be relevant as expenses will presumably exceed it. It may be that there is a trade as well as a property letting business, or conceivably that the room letting is part of a trade (addressed in the link). If you divide profits equally and have no other income, I would be surprised if your profits were over the two personal allowances and rent a room relief.

daveshow

Dazed+ confused i was referring to this for the £1,000

Trading allowance

The trading allowance is a tax exemption of up to £1,000 a year for individuals with trading income from:

• self-employment
• casual services, for example, babysitting or gardening (helpsheet 325 has more information about other taxable income)
• hiring personal equipment, for example, power tools

Thanks Jeremy.

So ideally we would have income from 2 flats being rented.

The plan would be we use that income to pay mortgage on the 6 bedroom house and generate additional income by leasing out rooms, either for lodgers or short term holiday lets, airbnb type thing.

Thinking of other ideas for income were to have bicycles for hire to guests, paddleboards and the shooting. Also perhaps guided nature/industrial heritage tours of the local area. 

I would assume the hiring of equipment comes under the 1k allowance? And taking people on shooting trips could come off that too? As it would be irregular employment. 

Im trying and understand how much can be written off or avoided to maximise business profitability.

The plan is really to life the "good life" be as self sufficient as possible and have our income being generated by ourselves and our land/property. 

It does sound like a lot we are trying to do, basically the plan would be get the property first then look at aquiring equipment and hiring it out if feedback from guests suggested there would be a market for it.

Jeremy535897

I suspect the trading allowance is a bit of a red herring. If you do these sorts of activities on any sort of scale, I would expect your actual expenses to exceed £1,000 a year. Remember that the £1,000 allowance substitutes for expenses, rather than being in addition to them. It's also not available for partnership income (or income to which rent a room relief applies), and I assume you and your wife would form a partnership?

A similar issue applies to the £1,000 property allowance, as I suspect the allowable expenses on 2 flats will exceed £1,000.

It is hard to see that there will be any sort of deduction or tax credit for the interest on the mortgage for the new property.

You might increase your income with a bed and breakfast offering for people who might want to go cycling, shooting etc.

Edi81

daveshow said:

Hello folks,

Been discussing a "dream" with the missus.

Basically in the near future we were looking at obtaining a large 6 bedroom house and leasing out some of the rooms.

The plan was perhaps 1 or 2 double rooms and 1 room as a hostel type with bunk beds.

Also perhaps looking to hire out bicycles, paddle boards and take people clay shooting as the area we are in would be very suited to all that.

But basically I do not believe in handing over the Government our hard earned cash if it can be helped

So I would like to look at all forms of tax relief to take advantage of.

So i would like to ask. If we gave up work how do we best tak advantage of the tax free earnings limit? Also the tax threshold of renting out rooms which I believe is currently about £7,500.

Could anyone advise on how to juggle things and what the maximum we could earn before tax has to be paid?

Can we both earn the tax free earnings limit and apply the 7,500 on top of that? Can we do 7,500 each some how? Can we use the £1,000 casual services allowance in anyway? Is the tax free allowance 7.5k in profit or total earnings?

Any and all advice appreciated

Many thanks

Who do you think pays for government services such as the NHS? 

Dazed_and_C0nfused

Edi81 said:

daveshow said:

Hello folks,

Been discussing a "dream" with the missus.

Basically in the near future we were looking at obtaining a large 6 bedroom house and leasing out some of the rooms.

The plan was perhaps 1 or 2 double rooms and 1 room as a hostel type with bunk beds.

Also perhaps looking to hire out bicycles, paddle boards and take people clay shooting as the area we are in would be very suited to all that.

But basically I do not believe in handing over the Government our hard earned cash if it can be helped

So I would like to look at all forms of tax relief to take advantage of.

So i would like to ask. If we gave up work how do we best tak advantage of the tax free earnings limit? Also the tax threshold of renting out rooms which I believe is currently about £7,500.

Could anyone advise on how to juggle things and what the maximum we could earn before tax has to be paid?

Can we both earn the tax free earnings limit and apply the 7,500 on top of that? Can we do 7,500 each some how? Can we use the £1,000 casual services allowance in anyway? Is the tax free allowance 7.5k in profit or total earnings?

Any and all advice appreciated

Many thanks

Who do you think pays for government services such as the NHS? 

What makes you think the op has the slightest interest in things like that!

That's someone's else problem 🙄

But basically I do not believe in handing over the Government our hard earned cash if it can be helped

daveshow

Edi81 said:

Who do you think pays for government services such as the NHS? 

🙄

I do, wether I want to or not & regardless of wether I use the services or not. Anyway thats what National Insurance is for. 

How much of my money is the Government entitled to waste?

lincroft1710

daveshow said:

Edi81 said:

Who do you think pays for government services such as the NHS? 

🙄

I do, wether I want to or not & regardless of wether I use the services or not. Anyway thats what National Insurance is for. 

National Insurance is a payment towards the state pension, not the NHS.

daveshow

Well whatever its for, ive more than contributed enough.

As I said just how much of peoples earnings is the Government entitled to have?

It also goes off topic as I have asked for advice on using the tax allowances the GOVERNMENT themselves give.

lincroft1710

daveshow said:

As I said just how much of peoples earnings is the Government entitled to have?

If you have an income in excess of £150K pa, then you will pay 45% of that in income tax and there is no personal allowance. Plus any secondary taxation such as VAT, NI, vehicle licence(s), TV licence, duties on fuel, alcohol and tobacco products etc. There is also Council Tax but payments do not go to central government.