Can lodger work from home?

user1977

1404 said:

If your lender stipulates that you're allowed two lodgers, but you have three for a significant period of time, what might be the consequences? 

They'll wag their finger and tell you to get rid of at least one lodger. In theory they could use the breach as justification to demand you remortgage away from them, or failing that they repossess, in practice they're hardly likely to (assuming you're not otherwise in default).

Shadyocuk

1404 said:

Someone else I know who lets out rooms is stressing about a slightly different topic: Regarding the number of lodgers your lender permits.
If your lender stipulates that you're allowed two lodgers, but you have three for a significant period of time, what might be the consequences? 

Absolute worse case , the lender finds out they are in breach of the conditions and calls in the mortgage (asks for full repayment). 

More likely , the lender finds out and states that one lodger has to go or decides they can charge a higher interest rate.

Most likely , the lender never finds out and nothing happens  (not that I am suggesting anyone should breach their terms).

I assume they have checked that their home insurance is still valid , as they really would not wont to find that out the hard way.

 

1404

Shadyocuk said:

1404 said:

Someone else I know who lets out rooms is stressing about a slightly different topic: Regarding the number of lodgers your lender permits.
If your lender stipulates that you're allowed two lodgers, but you have three for a significant period of time, what might be the consequences? 

Absolute worse case , the lender finds out they are in breach of the conditions and calls in the mortgage (asks for full repayment). 

More likely , the lender finds out and states that one lodger has to go or decides they can charge a higher interest rate.

Most likely , the lender never finds out and nothing happens  (not that I am suggesting anyone should breach their terms).

I assume they have checked that their home insurance is still valid , as they really would not wont to find that out the hard way.

 

Thankfully insurance is all correct and allows for lodgers. That really would be a biggy if something were to happen. That's the stuff of nightmares.

I guess the (obvious) take away from all this is: know your lender's and insurer's rules and stick to them. The consequences, at least in theory, can be big. 

1404

I will nonetheless call HMRC tomorrow to run the home working of the lodgers past them. Can't hurt just to square that circle just in case. 

mybestattempt

1404 said:

I will nonetheless call HMRC tomorrow to run the home working of the lodgers past them. Can't hurt just to square that circle just in case. 

I don't think there will be an issue, this is what the HMRC guidance in their Property Income Manual says:

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4001

1404

mybestattempt said:

1404 said:

I will nonetheless call HMRC tomorrow to run the home working of the lodgers past them. Can't hurt just to square that circle just in case. 

I don't think there will be an issue, this is what the HMRC guidance in their Property Income Manual says:

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4001

Thank you very much for that link. I think this is the key paragraph for the purposes of this conversation:

"The rent-a-room scheme does not apply to rooms let as an office or for other business purposes, see PIM4002. But the scheme applies to genuine lodgers who study at home or who do some of their business work at home in the evenings or at weekends."

I think that clearly applies to both of the lodgers I have/will have.

Really good to be armed with the facts. It's an absolute minefield!

Olinda99

1404 said:

I will nonetheless call HMRC tomorrow to run the home working of the lodgers past them. Can't hurt just to square that circle just in case. 

HMRC answer the phone ??

FrnC

I have two lodgers. They were on rent a room, but HMRC kicked me off it because one works from home one day a week. They only allow evenings and weekends, if you look at the helpsheet. Costing me £1000 a year in tax. Had to re-do last year's tax. I phoned them three times about it but got the same answer each time. Originally, 2 years ago, they told me it didn't make any difference.

FrnC

user1977 said:

HMRC only care about how much rent you're getting.

I doubt anybody has a problem with working from home these days (in the sense of sitting by yourself using a computer/phone) but if you want to know, read your mortgage conditions and insurance policy. I wouldn't expect them to apply a more stringent policy to lodgers than to yourself though.

I presume you had already checked that having a lodger was ok with your lender/insurer?

Afraid not. HMRC kicked me off rent a room because one lodger works from home one day a week. I triple checked, because two years ago I was told it made no difference. The rent a room help sheet says evenings and weekends is ok. SpareRoom say this is news to them. But now I have to pay tax on most of the rent.

Another thing you have to watch out for is capital gains tax when you sell. I understand the principles, but when I looked at the form I was clueless. And you have to report it within 60 days of selling, AND, I think, on your next self assessment.

The principle is that if you rent out 40% of your house, you pay tax on 40% of your gain, less Letting Relief.

FrnC

Spare Room emailed me again today, to reiterate that it is news to them. They suggested I speak to a senior manager at HMRC, so I am waiting for a call back. Will let you know what happens.