What are the rules for resident landlords

Everything you need to know about tax refunds if you are a director

Our experts at DSR Tax Claims aim to make life as simple as possible for our clients. We know how difficult it can be to find good, quality information about HMRC legislation and we don’t want you to fall foul of the rules so we have created these helpful guides to let you know where you stand. So, if you are a resident landlord and have questions about your taxes, let us clear things up for you. You can also call our team of experts on 0330 122 9972 – we are always happy to help our clients.

What is a resident landlord?

A resident landlord is someone who lives in the rental property as their main or only home and who rents out part of that property to others, for example renting a room in your home to a lodger. If you receive income for renting parts of your property to others, you will need to inform HMRC about this income – even though you might not have to pay any tax on it.

Does the Rent a Room scheme apply to you?

If you rent a furnished room in your home, such as to a lodger, then you could be eligible to take part in the Rent a Room scheme. This scheme means that you can earn up to £7,500 per year in rental income (or £3,750 if you are letting jointly with a partner) before you have to pay any tax on that income. The £7,500 is the overall limit, not the per-room limit – so if you rent out more than one room, you can’t earn £7,500 per room rent free. There are eligibility rules about the scheme though – it has to be a furnished room within your home. If you have converted a part of your house into a totally separate dwelling then it doesn’t count.

If you provide any meals to your lodger, you can charge for those and as long as you remain under that £7,500 threshold, you aren’t liable to pay any tax on your Rent a Room income.

Are there any downsides to the Rent a Room scheme?

The main downside is that you can’t claim any allowable expenses with regard to the room rental. If you have to maintain or repair the property, you have to shoulder that cost yourself – you can’t claim any tax relief on it. Same goes for any capital expenditure you might make on improving the property – the expense is yours alone.

You will also need to make sure that your mortgage lender allows you to take in a lodger, and similarly, that your home insurance provider allows it too or you could find yourself out of pocket.

It might work out in your best interests to get professional advice about whether to take part in the Rent a Room scheme – our experts can let you know whether it is your best option, so give us a call on 0330 122 9972.

What about mortgage interest tax relief for resident landlords?

Bad news we’re afraid. Resident landlords used to be able to claim mortgage interest payments as an allowable expense but since April 2017, restrictions are being phased in. This means that you will only be able to claim a basic 20% deduction to your mortgage interest payments by the end of the four-year phasing in period. Expert advice from our tax specialistsshould help you work out the best way to deal with these expenses.

Our experts at DSR Tax Claims aim to make life as simple as possible for you by taking the hassle out of your taxes so call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

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