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I own and rent out two small flats. I also have a lodger in…

I own and rent out...

I own and rent out two small flats. I also have a lodger in my home which I also own. When calculating my total profit I have included all rental income including that from my lodger. I have made some repairs and renewals at my home and at the flats. Can I include all these as expenses or only the ones at the flats, and claim the 'Rent a room' allowance of £4250?

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Answered in 11 minutes by:

9/29/2011

UK Tax Professional: Tony Tax, Tax Consultant replied 11 years ago

Tony Tax, Tax Consultant

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Hi.

Can you tell me how you have dealt with the lodger income in previous tax years please.

Customer reply replied 11 years ago

I wasn't living in my house for the whole of the previous tax year. The whole house was rented out for part of that year. I didn't include the lodger rental as it I thought I shouldn't as it was below £4250. I don't think I did this correctly?

UK Tax Professional: Tony Tax, Tax Consultant replied 11 years ago

Thanks.

For the sake of simplicity, use the rent a room scheme for the lodger income. You probably won't have big repair bills every year and so the £4,250 tax free in lieu of claiming expenses will leave you well in pocket. Read about it here.

Account for the income and expenses on the flats separately.

Let me know if you have any queries.

Customer reply replied 11 years ago

I have made a loss on the flats and the £4250 does no cover the costs of repairs and renewals at the house either. I'm just not sure how much, if any, of the repairs to include in my 2010-11 return. If I account them separately, then I will have to cover this loss myself?

UK Tax Professional: Tony Tax, Tax Consultant replied 11 years ago

What have you incurred in repair and renewal expenditure on at your house? What was the cost? Is any of it directly linked to the lodger's room?

Customer reply replied 11 years ago

I have redecorated the lodgers room but also updated and decorated the bathroom and kitchen which are used by the lodger and myself. I have spent almost £3388.

UK Tax Professional: Tony Tax, Tax Consultant replied 11 years ago

You said earlier that the £4,250 repairs does not cover the repairs on the house. £3,388 is less than £4,250.

As you are living in the property, the Revenue will only allow you to claim a proportion of the £3,388, certainly not more than half and probably much less than that. Under the rent a room scheme, you can have tax free rent of £4,250 a year. Unless you are incurring in excess of £4,250 in allowable expenditure each year taking account of the fact that most will be disallowable because you live there, you will be better off using the rent a room scheme where you claim no expensse but have £4,250 in tax free income. You cannot switch between the two methods once you have chosen one simply because it suits you financially.

Tony Tax, Tax Consultant

Category: UK Tax

Satisfied Customers: 16,712

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

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