With a lodger, can I off-set my household bills?

[nantes]

I was thinking of renting a spare room in my flat to a lodger. As I will declare the income to the tax man, can I off-set my household bills?

[jeffrey]

Do you mean the Rent-A-Room scheme?

[Telometer]

You have a choice. Either you use the rent a room scheme which gives you the first £4,250 of rent & other receipts (e.g. contributions to electricity, cleaner etc.) free of income tax, or you can do a gruesome and painful apportionment of your mortgage, electricity bills etc.

http://www.direct.gov.uk/en/MoneyTax...ome/DG_4017804

[nantes]

I hadn't heard of the rent-a-room scheme. I'll look into that and the other more time consuming method.

[nantes]

If I went for the 'gruesome' method, can anyone tell me the process?

[Telometer]

Calculate floor area of any part of flat to which lodger has exclusive rights (i.e. bedroom & en suite bathroom? say 200 square feet); calculate floor area of entire flat (say 800 sq. ft).

Apportion all expenses relating to flat to lodger. In the above example 25% of all expenses are deductible. That would require mortgage + utilities to amount to £17,000 per annum in order for you to be better off that way.

[nantes]

Oh my goodness. That is quite difficult for my poor little brain to work out. I think I'll stick to the rent a room scheme.

[nantes]

If I understand the system correctly, I deduct both my personal allowance (£6475) and my rent-a-room scheme allowance (£4250) from my rent turnover to achieve a figure which is taxable?

[Telometer]

Do you have a job? Any other income?

[nantes]

I do have a job so presumably the personal allowances is taken into account already.

[Telometer]

Correct. So it is taxable at your marginal rate of income tax - 22%, 40% or 50%.