My partner and I earn roughly £45k each in salary income (this fluctuates annually).
In addition we have income generated from our main family home in two ways -
1) When in the home we rent out one room on Air BnB to short stay travellers.
2) When not in our home, we rent out the entire house on sites such as Air BnB, HomeAway, Tripadvisor etc to holidaymakers. Between these 2 sources we generate roughly £20k a year in addition to our £45k each. (£16k between the 2 sources last year, projections for £25k 2016/2017).
We don't qualify for the FHL regime as don't rent out for enough days.
My questions are as follows:
1) Can we claim rent a room relief against the room rentals part of the income AND claim expenses against the whole house part of the income (as if it were normal rental income)? Or do the whole house rentals rule out Rent a Room relief on the room part of it? HMRC have not given me a clear answer but their guidance would seem to suggest that they will lump all the income on the property together and then it's either claim Rent a Room or Expenses against the whole amount despite the different sources.
If it's the latter and we only generate a small amount of Rent a Room in a given year eg £2500 in rent a room income and £12500 in whole house income, can we still apply the £7500 Rent a Room relief to the whole amount?
2) Is it property income or trading income in terms of filling out tax return? I know B&B's are trading income but since we're not a B&B, is it Property Income?
3) If not going down Rent a Room route, what expenses can we claim? Can we claim CapEx (eg soundproofing so guests don't annoy neighbours)
4)What about CGT liability. I understand we're exempt as a main residence but running any kind of business there may make us liable. If it makes us liable for CGT then I am assuming I can claim all CapEx against future CGT liability?
5) How do we apportion expenses between us and the business? For example, our gas and elec bills are much higher during whole house rentals and we have extra insurance costs. If we only claimed the excess gas and elec on a per diem basis for rentals we will be out of pocket as guests use a lot more than we do each day. Can we simply account for this as an estimate of what it costs over and above our normal bills?
6)We own the house 50/50 on the deeds. Can just one of us account for the entire income on their tax return or do we have to account for the income 50/50 (I realise that Rent a Room relief gets split). Could we also elect to share the profits on a different split from the deeds? (I read something in a TaxCafe book about this being legitimate). It might be useful for us to have the ability to do this to use up our tax allowances should one of us earn significantly more or less in our day jobs in future.[/list][/list]
Thanks
Lisa
- Home
-
Tax News
- Budgets and Autumn Statements
- Income Tax
- Business Tax
- PAYE and Payroll Taxes, National Insurance, NICs
- Company Taxation
- Savings & Investments, Pensions & Retirement
- Capital Gains Tax, CGT
- Property Taxation
- Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
- Tax Investigations & Enquiries
- VAT & Excise Duties
- Stamp Duty, Stamp Duty Land Tax, SDLT
- International Tax
- HMRC Administration, Practice and Methods
- Professionals in Practice & Industry
- General
- TaxationWeb
-
Tax Articles
- Budgets and Autumn Statements
- Income Tax
- Business Tax
- PAYE and Payroll Taxes, National Insurance, NICs
- Company Taxation
- Savings and Investments, Pensions and Retirement
- Capital Gains Tax, CGT
- Property Taxation
- Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
- Tax Investigations & Enquiries
- VAT & Excise Duties
- Stamp Duty, Stamp Duty Land Tax, SDLT
- International Tax
- HMRC Administration, Practice & Methods
- Professionals in Practice & Industry
- General
- Tax Tips
-
Tax Forum
- Income Tax
- Business Tax
- PAYE and Payroll Taxes, National Insurance, NICs
- Company Taxation
- Savings & Investments, Pensions & Retirement
- Capital Gains Tax, CGT
- Property Taxation
- Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
- Tax Investigations and Enquiries
- VAT & Excise Duties
- Stamp Duty, Stamp Duty Land Tax, SDLT
- International Tax
- HMRC Administration, Practices & Methods
- Professionals in Practice & Industry
- General
- Tax Jobs
- Get in Touch