If I am renting out a room do I need to pay tax?

by Readers Question

13:50 PM, 30th January 2020
About 7 months ago

If I am renting out a room do I need to pay tax?

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If I am renting out a room do I need to pay tax?

I have a 3 bed house and I was living there alone so I advertised last month and got a housemate in a few weeks ago. She has her own bathroom and bedroom.

It has just occurred to me that I may need to pay income tax on this money I am charging her, but I am not entirely sure. I looked online at the income tax and it wasn’t conclusive, but it seems that it would push some of my yearly income over the threshold so I may need to pay 40% tax on part of it?

Can anyone confirm?

Do I need to do a self assessment?

I would have charged a higher amount of rent had I of realised there would be this additional cost to myself.

Miss Nelson



Comments

Neil Patterson

13:59 PM, 30th January 2020
About 7 months ago

Income from renting a room will qualify for - rent-a-room relief

If your gross income from the room does not exceed £7,500 before the deduction of any expenses
The source of the income relates only to one residence and the income arises from the letting of furnished residential accommodation
The house in which the room is let is your only or main residence.

If the above conditions are met, the income is exempt from tax and you cannot claim any deductions for related expenses. You do not need to do anything for the exemption to apply as it will apply automatically unless you opt out.

James Nelson

12:49 PM, 31st January 2020
About 7 months ago

That perhaps needs clarifying Neil. You say the rent cannot exceed £7500 after expenses but then say that you cannot deduct expenses ?

Also , what if it exceeds £7500 ? Is the first £7500 tax free ?

Michael Barnes

13:02 PM, 31st January 2020
About 7 months ago

It may also depend on whether landlady has the right to access the bedroom and bathroom.

SimonP SimonP

16:59 PM, 31st January 2020
About 7 months ago

Far quicker directing the poster to the HMRC Help Sheet which explains everything in detail. The criteria are plainly laid out; access to bedroom and bathroom is irrelevant and probably said tongue in cheek.

https://www.gov.uk/government/publications/rent-a-room-for-traders-hs223-self-assessment-helpsheet/hs223-rent-a-room-scheme-2019

Jay James

19:03 PM, 31st January 2020
About 7 months ago

Reply to the comment left by James Nelson at 31/01/2020 - 12:49No, Neil did not "say the rent cannot exceed £7500 after expenses", therefore most of your post is not applicable. I have certainly misread items on here before and was pointed to a reread. You may benefit from doing the same as it may answer the parts of your post that remain applicable.

tony

9:57 AM, 1st February 2020
About 7 months ago

Hi All the above is quite straight forward about tax payable or not for renting out a room in your own property,
I have another related question to this that I have not been able to find the answer to on the gov website.
Which is would the amount of tax I pay to HMRC be affected if I
1 receive income from self employment
2 receive income from HMO property
3 receive income from renting a room in my property even though the income is below the £7500 limit
In other words is the third income taxable over all to my income even though its below the taxable limit.
Any advice would be most appropriated.
Thanks Tony

Puzzler

10:01 AM, 1st February 2020
About 7 months ago

Reply to the comment left by Tony Church at 01/02/2020 - 09:57
No your rent a room income has a threshold of £7500 regardless of other income

Michael Barnes

18:13 PM, 9th February 2020
About 6 months ago

Reply to the comment left by SimonP SimonP at 31/01/2020 - 16:59
"access to bedroom and bathroom is irrelevant and probably said tongue in cheek."

Not tongue in cheek.
I understand that it is possible to create an AST and so have a tenant rather than a lodger.
I do not know the details of the argument, but I believe it comes down to "exclusive occupation". Access to the bedroom and bathroom mean not exclusive occupation.

I was considering the type of occupation that might arise, and the possibility that "rent a room" does not apply for tax purposes if it turns out the occupier is a tenant.


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