Allowable expenses when renting rooms to lodgers

Grumpy_chap

valueman1 said:

As far as I’m aware there are no allowable expenses, so you are taxed on anything above £7,500.

I don't think that is correct / complete.

You can either elect for "rent-a-room scheme" in which case everything above £7.5k is taxed.

OR you can elect for actual expenses basis where you deduct allowable expenses from total rent paid by lodgers and the balance is taxed.

RAS

1404 said:

katejo said:

To charge £15 K a year just to rent a room?! I used to let one but kept below the rent a room allowance most of the time because it was so much easier to work out. Briefly paid tax on the excess before the limit went up to £7500. 

It was an example figure, but £15,000 would be two rooms at £625 each.  Quite normal rent thesedays and two lodgers are allowed.

Do also check the CGT situation if you have more than one lodger for any length of time.

1404

RAS said:

1404 said:

katejo said:

To charge £15 K a year just to rent a room?! I used to let one but kept below the rent a room allowance most of the time because it was so much easier to work out. Briefly paid tax on the excess before the limit went up to £7500. 

It was an example figure, but £15,000 would be two rooms at £625 each.  Quite normal rent thesedays and two lodgers are allowed.

Do also check the CGT situation if you have more than one lodger for any length of time.

CGT as well as income tax?

propertyrental

1404 said:

RAS said:

1404 said:

katejo said:

To charge £15 K a year just to rent a room?! I used to let one but kept below the rent a room allowance most of the time because it was so much easier to work out. Briefly paid tax on the excess before the limit went up to £7500. 

It was an example figure, but £15,000 would be two rooms at £625 each.  Quite normal rent thesedays and two lodgers are allowed.

Do also check the CGT situation if you have more than one lodger for any length of time.

CGT as well as income tax?

There's a good explanation of both taxes here:

https://www.taxinsider.co.uk/letting-a-room-in-your-own-home-dont-forget-about-capital-gains-tax

1404

propertyrental said:

1404 said:

RAS said:

1404 said:

katejo said:

To charge £15 K a year just to rent a room?! I used to let one but kept below the rent a room allowance most of the time because it was so much easier to work out. Briefly paid tax on the excess before the limit went up to £7500. 

It was an example figure, but £15,000 would be two rooms at £625 each.  Quite normal rent thesedays and two lodgers are allowed.

Do also check the CGT situation if you have more than one lodger for any length of time.

CGT as well as income tax?

There's a good explanation of both taxes here:

https://www.taxinsider.co.uk/letting-a-room-in-your-own-home-dont-forget-about-capital-gains-tax

Thank you for this.  I had looked into this in the past but forgot about it.  Yes, technically CGT could be payable having had lodgers.  However, I can't really work out a situation where this would be an issue.  The tax paid, if any, would be pretty negligable.  What scenarios do you think would see a significant amount of CGT payable?

Seems from what I can see that as long as the landlord controls more rooms than they rent out then CGT is not a factor.  But that CGT becomes a big factor if more of the property is rented out than the landlord lives in.

1404

I've read that "the laws/rules change" when you go from 2 lodgers to 3 lodgers.  

Is anyone able to explain what changes?

I am aware, of course, that the rules certainly change if there are 4 lodgers as the property then becomes a licensed HMO and attracts additional regulation.

_Penny_Dreadful

1404 said:

I've read that "the laws/rules change" when you go from 2 lodgers to 3 lodgers.  

Is anyone able to explain what changes?

I am aware, of course, that the rules certainly change if there are 4 lodgers as the property then becomes a licensed HMO and attracts additional regulation.

To which particular laws/rules are you referring? 

1404

_Penny_Dreadful said:

1404 said:

I've read that "the laws/rules change" when you go from 2 lodgers to 3 lodgers.  

Is anyone able to explain what changes?

I am aware, of course, that the rules certainly change if there are 4 lodgers as the property then becomes a licensed HMO and attracts additional regulation.

To which particular laws/rules are you referring? 

That's the question I'm asking. I don't know what changes between 2 lodgers and 3.

Two lodgers is definitely allowed. Four lodgers is definitely not allowed (without a licence etc). But three lodgers is a bit of a grey area in my mind. I'm not sure what the laws/rules are when it comes to three lodgers.  

sheramber

https://www.gov.uk/private-renting/houses-in-multiple-occupation#:~:text=Your home is a house,kitchen facilities with other tenants

Your home is a house in multiple occupation (HMO) if both of the following apply:

• at least 3 tenants live there, forming more than 1 household
• you share toilet, bathroom or kitchen facilities with other tenants

Your home is a large HMO if both of the following apply:

• at least 5 tenants live there, forming more than 1 household
• you share toilet, bathroom or kitchen facilities with other tenants

1404

sheramber said:

https://www.gov.uk/private-renting/houses-in-multiple-occupation#:~:text=Your home is a house,kitchen facilities with other tenants

Your home is a house in multiple occupation (HMO) if both of the following apply:

• at least 3 tenants live there, forming more than 1 household
• you share toilet, bathroom or kitchen facilities with other tenants

Your home is a large HMO if both of the following apply:

• at least 5 tenants live there, forming more than 1 household
• you share toilet, bathroom or kitchen facilities with other tenants

Three lodgers becomes an HMO then. But not a "large HMO", which requires a licence.

So the question is: what does a 'three lodger HMO (plus live-in landlord)' mean in terms of compliance?