Specific HMRC form for – Rent a room Method B?

Specific HMRC form for – Rent a room Method B?

11:07 AM, 25th November 2021, About A week ago 2

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My daughter bought a house which she shares with two friends as her tenants. They pay below market value rents for the area, but this year the rental income will be above the £7,500 annual rent a room allowance.

She wants to opt for “Method B” (pay tax on gross rents to extent this exceeds £7,500, no allowance for expenses).

HMRC guidance HS223 says that she has to notify them before 31 January – but I can’t find any information on how to notify them.

Does anyone know if there is a specific form she needs to fill in or a section of HMRC she has to write to?

Many thanks

Jane

3.2 If your gross receipts are more than the Rent-a-Room limit

>> https://www.gov.uk/government/publications/rent-a-room-for-traders-hs223-self-assessment-helpsheet/hs223-rent-a-room-scheme-2017–2

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 cannot 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.

4. Time limit

You must let HMRC know within one year from 31 January following the end of the tax year if you:

  • do not want to use the Rent-a-Room Scheme when your receipts are below £7,500 (or £3,750), for example, if you want to claim losses
  • want to start or stop paying tax on your gross receipts over the Rent-a-Room limit (Method B)


Comments

by Olls63

13:07 PM, 25th November 2021, About A week ago

If she hasn't already registered for self-assessment she will need to do so, as the income is above the threshold.
When she completes the property income section and enters the total rent received, it will automatically deduct the £7,500 and just tax her on the excess.

by Simon Lever

19:36 PM, 25th November 2021, About A week ago

As above Jane should have registered for self assessment and be submitting tax returns.
If this is not the case then register now. Should be no problems as no tax lost to Revenue.
If there is no obvious way to notify HMRC then just write to them advising of the situation. Prepare tax return accordingly and you have full justification if they think you have done it wrong. If they want you to notify them some other way they will tell you in response to your letter.


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