Short term lodger

MrChips

Hello!

An overseas friend of a friend wants to send their 18 year old daughter to the UK for a couple of months in the Autumn to enrol on an English language course.  They've asked if she could stay with us in a spare room while she is here on a paid basis.

From what I can tell, so long as my wife and I do not receive more than £7,500 in total, then the additional income would not be taxed, and there's no paperwork to complete.

Is anyone able to confirm this understanding? Thanks!

FlorayG

Yes it comes under the Rent a Room scheme and is not taxed
If you complete a self-assessment you have to declare it, but it's not included in your tax assessment
If you are only PAYE you don't need to declare it at all but do keep some proof of the income in case HMRC comes back to you (some nosey neighbour reports you)

DE_612183

It's £7500 ( or £3750 per person if shared ) for the whole year - no just each time you rent out.

poseidon1

MrChips said:

Hello!

An overseas friend of a friend wants to send their 18 year old daughter to the UK for a couple of months in the Autumn to enrol on an English language course.  They've asked if she could stay with us in a spare room while she is here on a paid basis.

From what I can tell, so long as my wife and I do not receive more than £7,500 in total, then the additional income would not be taxed, and there's no paperwork to complete.

Is anyone able to confirm this understanding? Thanks!

Not taxable unless exceeding the limit, but also not declarable per HMRC guidance link below 

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

Bookworm105

as you refer to "us" then note the comment above, the rent a room allowance is £3,750 per tax year for each of "you" assuming you both own the property. Who gets the cash in their bank account is not the deciding factor (although a joint account obviously makes it much simpler to prove).

MrChips

Thanks all.

I was wondering about that last point.  The house is jointly owned by my wife and me.  I'm a higher rate tax payer and complete a self assessment form while she typically earns below the personal allowance and doesn't.  This lodger is almost certainly a one-off and so I don't think we'll get close to £3,750 in total, let alone £7,500 as she's only staying for 2 months.  But as the request has come via my wife (I have no relationship with the parties involved) and the money would be sent to her and I'd likely never even see it (we do not have a joint account and put all savings in her name), would we have discretion to allocate it all to her, or would I be deemed to earn half of the income myself? As there's no tax to pay, it probably doesn't even matter but would be interesting to understand how it's treated in these circumstances.

DullGreyGuy

I know you've asked this from a tax perspective but it's also worth checking other matters like your Home insurance. Its likely not to be a big problem but if you have a decent policy it may change the requirements on theft claims to require evidence of violent or forced entry given there will be a non-family member living with you. On budget policies it tends to be a requirement on all theft claims irrespective of who lives in the house. 


Having had a family member thats done similar... make sure the ground rules are understood etc too. When the lass turned up she was initially very diligent with attending the course but then realised living away from home for the first time in a less conservative society there were many more interesting things to do whilst in England than go to school. 

Nomunnofun1

MrChips said:

Thanks all.

I was wondering about that last point.  The house is jointly owned by my wife and me.  I'm a higher rate tax payer and complete a self assessment form while she typically earns below the personal allowance and doesn't.  This lodger is almost certainly a one-off and so I don't think we'll get close to £3,750 in total, let alone £7,500 as she's only staying for 2 months.  But as the request has come via my wife (I have no relationship with the parties involved) and the money would be sent to her and I'd likely never even see it (we do not have a joint account and put all savings in her name), would we have discretion to allocate it all to her, or would I be deemed to earn half of the income myself? As there's no tax to pay, it probably doesn't even matter but would be interesting to understand how it's treated in these circumstances.

It wouldn’t matter if you paid tax at 45% - the income from the lodger is outwith the tax system so long as it is £7500 or lower. 

Bookworm105

MrChips said: Thanks all.
I was wondering about that last point.  The house is jointly owned by my wife and me.  I'm a higher rate tax payer and complete a self assessment form while she typically earns below the personal allowance and doesn't.  This lodger is almost certainly a one-off and so I don't think we'll get close to £3,750 in total, let alone £7,500 as she's only staying for 2 months.  But as the request has come via my wife (I have no relationship with the parties involved) and the money would be sent to her and I'd likely never even see it (we do not have a joint account and put all savings in her name), would we have discretion to allocate it all to her, or would I be deemed to earn half of the income myself? As there's no tax to pay, it probably doesn't even matter but would be interesting to understand how it's treated in these circumstances.

 Given the short let and thus expected "small" sums involved, no tax is due for this tax year

But technically it does matter who physically receives the cash as it is that which determines if the allowance has to be split between the joint owners or remains intact with the single recipient. (Receipt into a bank account in sole name would of course be the safe option in confirming who out of the joint owners got what)

PIM4010 - Rent-a-room: exemption limits - HMRC internal manual - GOV.UK

"The exemption limit of £7,500 is reduced to £3,750 if during the tax year to 5 April, someone else received income from letting accommodation in the same property. This may happen where the taxpayer owns their home jointly with another person."