Rent a room relieft - multiple rooms?

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    Rent a room relieft - multiple rooms?

    Hello. My first post here!

    If I have a property with 4 bedrooms. Can I rent 3 rooms and still get the current £7500 relief? Total rental income will exceed the £7500 and I appreciate I will pay tax on anything over this. I am a higher rate 40% tax payer on this income so it would help if it is possible to get it.

    Thanks!

    #2
    That ain't how it works.

    You either get rent less than £7500, and pay no tax on it, or get more rent than that and pay normal income tax. (Sounds like you'd be best off letting two rooms to keep under the £7500.)

    Comment


      #3
      For reference

      http://forums.moneysavingexpert.com/....php?t=5644382
      Thunderbirds are go

      Comment


        #4
        JK0,

        a somewhat confusing reply from you since what OP has posted is precisely how it works...

        if the total income is more than the rent a room allowance, but the taxpayer elects to claim the allowance, then the taxpayer will have to pay their marginal rate of tax on the income in excess of the allowance

        Op states he is a higher rate taxpayer, so will pay 40% on the amount above 7,500.
        even though he is a higher rate taxpayer he will still get the 7500 tax free since it is what it is, a tax free allowance available to any resident landlord

        on the other hand, if OP decides not to claim the allowance, only then would what you have written be true, ie Op would pay income tax on his net profits: gross income - allowable costs = net taxable income. The whole point of the RAR is to allow taxpayers to choose to avoid having to do such calculations and keep cost records

        Comment


          #5
          Three people (who don't comprise a household) will mean the property is an HMO.
          That's probably more of an issue than the income tax (but the relief would be available if it's your home).
          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


            #6
            00ec25, you're right. Ignore my mutterings o/p.

            Comment


              #7
              I'd be more concerned about potential HMO liabilities too.
              There is always scope for misinterpretation.

              If my posts can be interpreted in two ways, one that makes you feel angry and one that doesn't, I meant the latter.

              Everyday is an opportunity to learn something new.

              Comment


                #8
                The tax rules are in this link to gov website :

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

                Comment


                  #9
                  You must be full time resident in your home and rent out one room under £7500 p.a

                  if the income exceeds £7500, you have to complete a tax return to declare the entire rental income and claim allowable expenses

                  If you rent out more than one room, you start to take on capital gains tax whilst living in your own home.

                  Comment


                    #10
                    Originally posted by Gordon999 View Post
                    if the income exceeds £7500, you have to complete a tax return to declare the entire rental income and claim allowable expenses
                    Not quite.

                    Over the threshold (£7500 this year) you must do a tax return, but you have the options of
                    a) deducting expenses and paying tax on the balance. or
                    b) getting the threshold amount tax free and paying tax on the remainder.

                    Comment


                      #11
                      If your gross receipts are more than £7,500 (or £3,750), you can choose how you want to work out your tax:

                      Method A
                      You pay tax on your actual profit - your total receipts less any expenses and capital allowances.

                      Method B
                      You pay tax on your gross receipts over the Rent-a-Room limit - that is, your gross receipts minus £7,500 (or £3,750). You can’t deduct any expenses or capital allowances if you choose this method.

                      HMRC will automatically use your actual profit (Method A) to work out your tax.

                      If you want to pay tax using Method B, you need to tell HMRC within the time limit. You will continue to pay tax on your gross receipts over the Rent-a-Room limit until you tell HMRC that you want to change back to paying tax on your actual profit (Method A).

                      If you pay tax using Method B, this automatically stops if your rental income drops below the £7,500 (or £3,750) limit.

                      Comment


                        #12
                        Originally posted by jpkeates View Post
                        Three people (who don't comprise a household) will mean the property is an HMO.
                        You're allowed two lodgers and it not be an HMO (this is a specific exemption). If the OP lets all three rooms, however, it will be an HMO and therefore may (or may not) need licensing and/or planning permission, and will definitely need to meet the basic HMO regulations.

                        I can't see any of this affecting the rent-a-room allowance situation, however.

                        Comment


                          #13
                          The OP was suggesting renting to three people, hence my comment.
                          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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