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Rent A Room, tax returns, etc

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

Reply to
Pete Verdon
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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.

Reply to
Clifford Frisby

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! :-)

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.

Reply to
Ronald Raygun

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.

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

Reply to
Pete Verdon

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