Raise the Roof – Are Shelter listening to landlords at long last?

Raise the Roof – Are Shelter listening to landlords at long last?

9:25 AM, 10th February 2014, About 8 years ago 19

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According to SpareRoom.co.uk there are around 15 million spare rooms in the UK.

Letting just 10% of these could go a long way towards solving the UK housing crisis.

Against this backdrop I was delighted to read today that housing charity Shelter are supporting a campaign by SpareRoom.co.uk to increase the “Rent A Room” tax breaks which have not changed since 1997. Currently, tenants and homeowners get the first £4,250 a year from renting a room in their own home tax free. The proposal is to increase this figure to £7,500 which makes a lot of sense given the housing crisis we are in.

The threshold is now almost £1,350 below the average room rent in the UK, which stands at £5,593 per year, and a staggering £3,417 under the average London room rent.

If the tax free allowance had risen in line with inflation it would now be at least £6,500 – still considerably below average London room rents. Since 1997, room rents have more than doubled (103%).

Unsurprisingly, there are now no areas of the capital with average rents of less than £4,250 per year – or £354 per month – while just a third (33%) of rooms across the rest of the UK are below this limit. You’d have to go back to 2009 to find a London postcode district with average rents of under £4,250 per year – and that was only one area, E12, according to SpareRoom’s data.

For at least a decade Shelter have alienated the PRS with their anti-landlord propoganda, their rogue landlords campaign and the creation and enforcement of legislation in Scotland, much of which has proven to be pointless even by their own admission. The support of the “Raise the Roof” campaign is certainly a step in the right direction for the charity but they need to do a lot more in order to win the hearts and minds of the PRS in my opinion.

Matt Hutchinson, director of SpareRoom.co.uk comments: “We’re in the middle of a massive housing crisis in the UK with house prices and rents becoming unaffordable. Everyone agrees we need to build more but we also need to be clever about how we use existing stock.

“Homeowners are sitting on an estimated 15 million spare bedrooms in England alone2. Encouraging them to let those rooms by raising the Rent A Room Scheme threshold will not only help them cope better with the cost of living crisis, but will also go some way to solving the supply issue. Raise the Roof - Shelter

“The current threshold discourages people from letting rooms because they’ll have to spend time filling out tax returns. Increasing the Rent A Room limit to reflect the market will act as an incentive to many cash-strapped homeowners, while reducing the pressure on the hyper competitive rental market within the capital and across the UK.”

For more details about the “Raise the Roof” campaign please complete and submit the form below.

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Comments

by Mark Alexander

14:37 PM, 10th February 2014, About 8 years ago

Reply to the comment left by "Jeremy Smith" at "10/02/2014 - 14:27":

Good question, I don't know.

Sam Cowen should though 🙂

Where are you Sam?
.

by Sam Cowen

14:40 PM, 10th February 2014, About 8 years ago

As far as I'm aware there's no restriction on who can take advantage of the rent a room scheme. If you're already filling in a tax return, you may prefer to claim expenses on the rental in your home, or you can use the rent a room scheme. You don't need to fill in a tax return to take advantage of the scheme.

by Ian Ringrose

14:53 PM, 10th February 2014, About 8 years ago

If I recall correctly, the main limitation on who can use it.
a) It must be a room in your own home.
b) You cannot claim any costs against income tax on your home if you use it.

I don’t know of any limitation on you renting out other properties in a normal way at the same time.

by Jeremy Smith

15:04 PM, 10th February 2014, About 8 years ago

I have just discovered this,and it links to another thread, in respect of, is renting property a business or an investment:
This looks like an internal guidance note for HMRC:

"Letting in residence part of a wider source

Income from the only or main residence cannot be within rent-a-room if the taxpayer receives rent from other properties and, on the facts of the case, all rents constitute one source of income (an example would be a guest house business conducted partly in the taxpayer's main residence and partly in a separate property).

Where no trade is being conducted, the ‘source’ will usually be the letting agreement.

Do not make enquiries if the taxpayer presents computations to show the only or main residence as a separate source unless you have good reason to suppose that they are wrong. "

source: http://www.hmrc.gov.uk/manuals/pimmanual/PIM4012.htm

there is also a flow chart to go with it:
http://www.hmrc.gov.uk/manuals/pimmanual/PIM4060.htm
(then click the link)

But I'm not sure if it does apply or not, since it mentions "one source of income", eg a guest house.

by Sam Cowen

15:04 PM, 10th February 2014, About 8 years ago

Full details on the Rent a Room scheme are available to download here: http://www.spareroom.co.uk/content/info-landlords/rent-a-room-scheme/

by Jeremy Smith

15:10 PM, 10th February 2014, About 8 years ago

Reply to the comment left by "Ian Ringrose" at "10/02/2014 - 14:53":

Ian,
I know you can use "Method A" or "Method B" for calculating tax.
..and you can deduct costs:
eg
Method A
Gross is, say £6,000, less costs of, say £5,000, you pay tax on £1,000.
or
Method B
Gross is, say £6,000, you deduct your allowance of £4,250, you pay tax on £1,750.

You have to elect if you wish to use Method A, if you are using the rent-a-room scheme and you do nothing, by default you are using the allowance method B.

by Ian Ringrose

15:20 PM, 10th February 2014, About 8 years ago

Reply to the comment left by "Jeremy Smith" at "10/02/2014 - 15:10":

Jeremy Smith,

I **think** if the income is over the "rent a room" allowance you have to say if you are using the "rent-a-room scheme". Given that you will have to fill in a tax return and there is a tick box on the tax return, it would be hard not to make an election.

by Ian Ringrose

15:21 PM, 10th February 2014, About 8 years ago

-> Do not make enquiries if the taxpayer presents computations to show the only or main residence as a separate source unless you have good reason to suppose that they are wrong.
-> Where no trade is being conducted, the ‘source’ will usually be the letting agreement.

If they meant that a landlord renting out other properties counted as the same source, I would expect them to give that as an example. Remember that being a normal landlord is not considered a trade, but running a B&B is.

by Jeremy Smith

15:30 PM, 10th February 2014, About 8 years ago

Yes Ian,
I agree, if the amount is over the threshold, you have to declare 'rent-a-room' on your return to be able to pay the tax.

I suspect that rent-a-room is considered a different source to let properties.
Therefore, rent-a-room would be allowed for landlords.

....And therefore, I got the wrong information, AGAIN! from an accountant.

- It's no wonder I do my blinking tax return myself nowadays !!
(with mistakes the last two years that I let (sorry-paid!!) someone else to do it for me.)


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