2 Lodgers (married), same room, Capital Gains Tax

Grecian123

Hi all.

I have searched high and low, but can’t find a definitive answer.

I bought my home in Dec 21 for £340,000. Last July my step brother and his wife moved in with me as lodgers whilst they looked for a new home to buy. This has gone on longer than anticipated and they will likely move out this December (after 1 1/2 years). I am looking to sell at the same time for about £380,000 (£40,000 gains)

For one lodger, you are exempt from Capital Gains Tax, however, for more than one lodger you start to become liable. However, as they are a married couple sleeping in one bedroom, I am unsure if they can be classed as one, or if they will be seen as more than one lodger and I will be liable to Capital Gains Tax.

Can any SMEs advise? What will the likely bill be?

Green_hopeful

There are loads of reliefs available. I rented my rooms out and after all the reliefs I didn’t owe any tax. I can’t remember the details but there is guidance here. https://www.gov.uk/tax-sell-home/let-out-part-of-home I got an accountant to do mine because I couldn’t work it all out but it was £300 well spent. 

marcia_

Grecian123 said:

Hi all.

I have searched high and low, but can’t find a definitive answer.

I bought my home in Dec 21 for £340,000. Last July my step brother and his wife moved in with me as lodgers whilst they looked for a new home to buy. This has gone on longer than anticipated and they will likely move out this December (after 1 1/2 years). I am looking to sell at the same time for about £380,000 (£40,000 gains)

For one lodger, you are exempt from Capital Gains Tax, however, for more than one lodger you start to become liable. However, as they are a married couple sleeping in one bedroom, I am unsure if they can be classed as one, or if they will be seen as more than one lodger and I will be liable to Capital Gains Tax.

Can any SMEs advise? What will the likely bill be?

 Surely a couple are not counted as 2 lodgers unless they both have a separate lodgers agreements? 

 Are they even lodgers if family? 

Keep_pedalling

Are you charging them rent that you have to declare to HMRC or just charging them their share of household expense? 

theartfullodger

marcia_ said:

Grecian123 said:

Hi all.

I have searched high and low, but can’t find a definitive answer.

I bought my home in Dec 21 for £340,000. Last July my step brother and his wife moved in with me as lodgers whilst they looked for a new home to buy. This has gone on longer than anticipated and they will likely move out this December (after 1 1/2 years). I am looking to sell at the same time for about £380,000 (£40,000 gains)

For one lodger, you are exempt from Capital Gains Tax, however, for more than one lodger you start to become liable. However, as they are a married couple sleeping in one bedroom, I am unsure if they can be classed as one, or if they will be seen as more than one lodger and I will be liable to Capital Gains Tax.

Can any SMEs advise? What will the likely bill be?

 Surely a couple are not counted as 2 lodgers unless they both have a separate lodgers agreements? 

 Are they even lodgers if family? 

Think one household for HMO but don't see why it has tax implications.

MobileSaver

Grecian123 said:

my step brother and his wife moved in with me as lodgers

Assuming that at times you all eat together and share, for example, the same lounge when watching TV then HMRC considers them to be part of your extended family and so there are no CGT implications.

HMRC CGT Statement of Practice 14 (1980)

Where a lodger lives as a member of the owner’s family, sharing their living accommodation and taking meals with them, no part of the accommodation is treated as having ceased to be occupied as the owner’s main residence, and the exemption is not restricted at all.

Bookworm105

Grecian123 said:

Hi all.

I have searched high and low, but can’t find a definitive answer.

I bought my home in Dec 21 for £340,000. Last July my step brother and his wife moved in with me as lodgers whilst they looked for a new home to buy. This has gone on longer than anticipated and they will likely move out this December (after 1 1/2 years). I am looking to sell at the same time for about £380,000 (£40,000 gains)

For one lodger, you are exempt from Capital Gains Tax, however, for more than one lodger you start to become liable. However, as they are a married couple sleeping in one bedroom, I am unsure if they can be classed as one, or if they will be seen as more than one lodger and I will be liable to Capital Gains Tax.

Can any SMEs advise? What will the likely bill be?

on those figures you will have zero to pay

Lettings relief is still available for lodger situations (but not tenants situations) ie where you share the living space with someone else

In very crude terms (*). say it is a 3 bed house + lounge and kitchen (bathrooms are ignored)
one bedroom has a pair of lodgers (married or not) 
4/5 of the property gets Private Residence Relief
1/5 gets Lettings Relief

Your 4/5 will get PRR in full: gross gain 40,000 x 4/5 = 32,000 exempt from CGT
remaining 1/5 will get lettings relief but you only have a further 8,000 of gain remaining, so no way will you face a CGT taxable gain as LR in this example would be 8,000 (lowest of 8,000, 32,000 or max cap of 40,000)

40 - 32 - 8 = zero gain 
also don't forget each owner gets a 3,000 CGT allowance on top of PRR and LR

* you need to split the property into % let, then follow the explanation on the helpsheet for PRR and LR 
HS283 Private Residence Relief (2024) - GOV.UK (www.gov.uk)

Grecian123

Keep_pedalling said:

Are you charging them rent that you have to declare to HMRC or just charging them their share of household expense? 

I’m using the rent a room scheme. I am charging them monthly payments that don’t go above the annual £7,500 tax threshold for the scheme. You don’t need to inform HMRC if it is below this. I pay the bills

silvercar

marcia_ said:

Grecian123 said:

Hi all.

I have searched high and low, but can’t find a definitive answer.

I bought my home in Dec 21 for £340,000. Last July my step brother and his wife moved in with me as lodgers whilst they looked for a new home to buy. This has gone on longer than anticipated and they will likely move out this December (after 1 1/2 years). I am looking to sell at the same time for about £380,000 (£40,000 gains)

For one lodger, you are exempt from Capital Gains Tax, however, for more than one lodger you start to become liable. However, as they are a married couple sleeping in one bedroom, I am unsure if they can be classed as one, or if they will be seen as more than one lodger and I will be liable to Capital Gains Tax.

Can any SMEs advise? What will the likely bill be?

 Surely a couple are not counted as 2 lodgers unless they both have a separate lodgers agreements? 

 Are they even lodgers if family? 

Even if they are lodgers (and that could be debated given they are family), I would think one of them is the lodger and the other permitted occupier, given they share a room.