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I am working out the income tax I must pay for a room I rented…

Customer Question

I am working out the...

I am working out the income tax I must pay for a room I rented in my home. I am deducting a proportion of the mortgage interest, Council Tax, utilities and 10% of net rent as expenses. What proportion of the total expenses do I deduct? Should it be based on area (sq.m) rented out, proportion of rooms (eg one out of four bed rooms) or proportion of people in the house etc?

Presumably I will have to pay the same proportion of the net profit as CGT when I sell, so I am keen to use the lowest figure acceptable. I am aware of the Rent a Room scheme but I cannot take advantage of it in this case (I am paying the tax outside the time limit for registering for it)

Submitted: 13 years ago.Category: UK Tax

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2/25/2010

UK Tax Professional: Tony Tax, Tax Consultant replied 13 years ago

Tony Tax, Tax Consultant

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Can you tell me which tax year you are preparing the figures for and how much rent you received for the letting of one bedroom. Was it let for a complete tax year?

Customer reply replied 13 years ago

Thanks for your response. It is for all complete tax years from 2004-5 to 2008-9 and the inclusive rental (including gas electricity Council Tax etc) was £5760 pa.

When I moved into a new property in April 2004 I rented out my old property as well as a single room in the new one. As I do not usually fill in Income Tax declarations (I am on the PAYE system) I omitted to tell Inland |Revenue about the income because I made a loss in all of the years - the rental income was never enough to cover outgoings and mortgage interest.

I now realise this is wrong and I am trying to rectify the situation by declaring the income. It would be better for me to use the Rent a Room scheme because this would cover £4250 of the income, and the remainder would be swallowed up my the loss on the rented property - but unfortunately I did not opt for the scheme so I have to work out a proportion of the expenses on my home to offset against the rent for the room.

UK Tax Professional: Tony Tax, Tax Consultant replied 13 years ago

You could apportion expenses based on the size of the room you let in relation to the total room in the house but normally it's calculated by adding up the number of rooms in the house and using that number to apportion expenses to the room you let. You would exclude the bathroom and separate lavatory if there is one from this calculation.

Tony Tax, Tax Consultant

Category: UK Tax

Satisfied Customers: 16,712

Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.

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