How can I calculate my net income from renting two rooms?

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    How can I calculate my net income from renting two rooms?

    Hello!

    Can you tell me please how can I calculate my net income from renting two rooms e.g. at 500pcm each?

    The flat is a three bedroom in Zone 5.

    What should I deduct from the income to see what is left?

    My income tax has reached the 40% band.

    Thanks!

    #2
    Assuming you're not part of the rent a room scheme, you can deduct the costs wholly and exclusively associated with letting the room - which is likely not to be too much.

    If you don't own your home and your local authority requires small HMOs to be licensed, that cost would be allowable for example.
    Last edited by jpkeates; 21-05-2020, 08:20 AM. Reason: Fixed 2nd para.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Painting and decorating, cleaning, gas safety cert, epc costs, advertising, travel to and from for inspection, electricity gas and water costs, council tax if you are paying it, agent fees, service charges, repair costs etc

      Comment


        #4
        Wonder if it might be worth getting educated? Probably cheaper than the alternative
        I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

        Comment


          #5
          I am presuming these are lodgers. Even so with 3 households this is an HMO so you need to check your borough regulations. Rent a room scheme allows for £7500 tax free. You will have to pay tax on any amount over this. If your living there as well there are going to be very little deduction you can make for tax purpose because you are also using the utilities council tax etc .

          Comment


            #6
            If the landlord is the owner of the property, they are allowed to have two lodgers without it being an HMO.
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

            Comment


              #7
              yes correct. allowed 2 lodgers. post is very unclear what he actually want to do.

              Comment


                #8
                The rent a room scheme details for resident landlords with lodger are in : https://www.gov.uk/rent-room-in-your...-a-room-scheme.

                You could take a percentage of costs based on floor area of 2 rooms compared to entire floor area . Say 25 % of council tax and buildings insurance.

                Comment


                  #9
                  I will be living there together with the lodgers. So to understand:
                  1) Costs for the bills and council tax respective to the room rented are tax deductible? So, I will be able to pocket them in whole?
                  2) I can claim additional costs related to the rented houses that will increase my tax allowance?
                  3) After the above are subtracted, the rent left will be taxed after the first £7,500? Is this for one or all rooms?
                  4) After the £7,500, I will be taxed at my current income tax band, e.g if I earn more than £35, it will be 40% on everything above the £7,500?

                  Thanks!

                  Comment


                    #10
                    You can't do both.

                    The rent a room scheme is intended to allow someone to rent a room or rooms with a limited impact on their tax.
                    So if you elect to use the scheme, the first £7500 of the income is tax free and then the rest is taxed at your normal rate of tax.

                    If you elect not to use the scheme, you can deduct expenses that are wholly and exclusively for the purpose of letting.

                    You may find an accountant who gives different advice (and will be a professional with liability insurance), but I don't see how you can apportion expenses that would arise anyway.
                    Your property council tax does not increase because of the lodgers, you might get away with the element of increased utility bills, but you would have to be prepared to "show your workings".
                    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                    Comment

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