Rent A Room, tax returns, etc


P

Pete Verdon

Hi,

I'm a young, single "professional" person who, rather than live alone in
a tiny flat, owns a 3-bedroom house and rents out two of the rooms to
colleagues from work. The rental is a "way of life" thing rather than a
business venture.

Before getting into this last year, I inhaled the various Inland Revenue
manuals on income from property, and I'm reasonably happy with how I
intend to deduct allowable expenses and so on in a "normal" year.
However, in the last tax year I only had the rooms occupied for a
shorter period, and the rent received was less than the Rent a Room
exemption. Do I need to submit a tax return for that year, in which I
set out the income received, observe it was under the limit, and show a
zero amount of extra tax? Or can I just call last year done, and make
sure I have all my ducks in a row for a full (non rent-a-room)
submission at the end of this year? Previously I've only ever had PAYE tax.

Thanks.

Pete
 
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C

Clifford Frisby

Pete said:
Hi,

I'm a young, single "professional" person who, rather than live alone in
a tiny flat, owns a 3-bedroom house and rents out two of the rooms to
colleagues from work. The rental is a "way of life" thing rather than a
business venture.

Before getting into this last year, I inhaled the various Inland Revenue
manuals on income from property, and I'm reasonably happy with how I
intend to deduct allowable expenses and so on in a "normal" year.
However, in the last tax year I only had the rooms occupied for a
shorter period, and the rent received was less than the Rent a Room
exemption. Do I need to submit a tax return for that year, in which I
set out the income received, observe it was under the limit, and show a
zero amount of extra tax? Or can I just call last year done, and make
sure I have all my ducks in a row for a full (non rent-a-room)
submission at the end of this year? Previously I've only ever had PAYE
tax.

Thanks.

Pete

I think it's safe to say that you only need to submit a tax return if you
are given a 'Notice to File' by HMRC.

If you don't get a 'Notice to File', there is still a general requirement to
let HMRC know if you owe any tax(*) for a tax year, and to do so within a
certain interval after the end of that tax year. (30th September rings a
bell). Presumably, this would trigger a 'Notice to File'!

So, in your case, assuming that you are eligible to, and want to use, the
Rent-a-room scheme, and you haven't been sent a Notice to File, I don't
think you have to do anything, other than keep appropriate records.

From memory, I think the Rent-a-room advice leaflet specifically advises
that there is no need to notify them. Also from memory, the Tax Return (if
you do have to do one) just has a single box on the Property supplement,
which would need to be ticked if you are using the scheme.

(*) This is a test that needs to be applied separately for Income Tax and
Capital Gains Tax, e.g. if you owed them £100 CGT you would have to stick
your hand up, even if you had also overpaid £100 Income Tax. But no further
refinement is required.

I'm not an accountant, so make sure someone else concurs, or check the HMRC
literature.

Cliff.
 
R

Ronald Raygun

Pete said:
I'm a young, single "professional" person who, rather than live alone in
a tiny flat, owns a 3-bedroom house and rents out two of the rooms to
colleagues from work. The rental is a "way of life" thing rather than a
business venture.
I've heard of taking work home, but dragging your colleagues along too,
and on a daily basis to boot, must make you a prize nerd! :)
Before getting into this last year, I inhaled the various Inland Revenue
manuals on income from property, and I'm reasonably happy with how I
intend to deduct allowable expenses and so on in a "normal" year.
However, in the last tax year I only had the rooms occupied for a
shorter period, and the rent received was less than the Rent a Room
exemption. Do I need to submit a tax return for that year, in which I
set out the income received, observe it was under the limit, and show a
zero amount of extra tax? Or can I just call last year done, and make
sure I have all my ducks in a row for a full (non rent-a-room)
submission at the end of this year? Previously I've only ever had PAYE
tax.
You will have gleaned from the inhaled material that you can only deduct
expenses in a "normal" year but not in a R-a-R year, so it's the gross
rent, not the net rent, which needs to be £4250 or less.

If I understand you right, last year was the first of this "way of life",
and there has not been a "normal" year before it.

In that case, as there is no extra tax to pay, you do not need to file a
return voluntarily. But if you get sent one to fill in (not likely now,
you would have had it already), then you should ask for the property
pages and just tick the "yes" box at the top.
 
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P

Pete Verdon

Ronald said:
Pete Verdon wrote:
I've heard of taking work home, but dragging your colleagues along too,
and on a daily basis to boot, must make you a prize nerd! :)
Heh. I possibly am a prize nerd, since the company is an IT firm, but
it's a very large one and mine and my housemates' work circles are
almost entirely separate and unrelated.

I do prefer to rent to people from work as I get to piggyback on the
recruitment assessment scheme that nutters and total wierdos
(hopefully!) wouldn't get through. Most of my experiences sharing houses
at uni and afterwards have been positive, but there was one notable
exception that I'd prefer not to repeat.
You will have gleaned from the inhaled material that you can only deduct
expenses in a "normal" year but not in a R-a-R year, so it's the gross
rent, not the net rent, which needs to be £4250 or less.
Yup, absolutely. It's just that having only rented for part of the year
last year, it falls below the RaR limit and so it's easier to deal with
it that way. Normally it won't, and I'll be taking the "deducting
expenses" route.

Pete
 

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