Renting out a room to a really filthy lodger...

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  • Renting out a room to a really filthy lodger...

    If I rent out a room to someone, I believe the first £4000 or so is tax exempt. As it should be. Fine – I get this. And then, when it’s above this amount, I’d have to pay tax on the “profit,” right? – e.g. what he/she pays over and above the £4k. So, say he/she paid £400 a month to me? Well, this would equate to £4,800 a year, meaning I’d have to pay 20% of that £800 to HMRC (assuming that’s the tax barrier I’m at, of course)…so, by my reckoning, the tax man would get about £200 from me per year. Right?

    But...Here’s where things get a bit weird. For instance, as a leaseholder, if I’ve been served, during the course of my ownership, various projects that I’ve been expected to pay towards by the freeholder/managing agent e.g. having to pay towards replacement windows/block maintenance costs etc...well, can it be argued that my ‘profit’ isn’t actually profit because I’ve incurred costs directly due to my homeowner/leaseholder status? In fact, how far do other costs as a homeowner get taken into account e.g. insurance, service charges etc?

    Also, does anyone know where the profit/"not to profit" line actually gets drawn? For instance, if I pay £1000 a month to my bank and rent out a room at £400 a month and I one day decided to voluntarily start paying back far more to my mortgage lender as an overpayer, does HMRC view the BASIC amount I should be paying on my mortgage monthly as the line where the profit margin gets implemented? With me on this? I hope someone can help! Thanks!!

  • #2
    If you opt in to the rent a room scheme, you cannot offset any expenses against your income.
    However, you can opt out of the scheme.
    If you opt out of the scheme, you can claim expenses against income. The election may be worth it if your rent from the lodger is over the limit.


    • #3
      Thanks. This is very helpful.


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