Property owners with a spare room in London could be quids in if they decide to rent it out for the thousands of spectators about to arrive for the annual Wimbledon tennis tournament, it is claimed.
Next year’s Olympic Games also offers an opportunity for property owners. The UK government’s Rent a Room scheme means that people can earn up to £4,250 per year without incurring any extra tax.
According to Anita Monteith, Tax Faculty Technical Manager at the Institute of Chartered Accountants in England and Wales, it provides a welcome tax break to help maximise income without incurring tax.
‘Major sporting events such as Wimbledon and the Olympics are perfect opportunities to participate in the scheme and you can save even more if you are diligent with keeping detailed records of income and outgoings,’ she said.
You need to follow the rules though. ‘If you take in a lodger, you must tell your mortgage lender or landlord and your buildings and contents insurer to make sure you aren’t breaching the terms of your mortgage, lease or insurance. Your insurance company may need to arrange extra cover,’ she explained.
She also described how it works. ‘You can take advantage of the scheme if you let furnished accommodation in your only or family home to a lodger. The tax relief does not apply to rooms let as an office or for other business purposes. A lodger can occupy a single room or an entire floor of your home,’ said Monteith.
‘The scheme does not apply if your home is converted into separate flats that you rent out. In this case, you will need to declare your rental income to HMRC and pay tax in the normal way.
‘If you provide meals and laundry services and make an additional charge for these, you will need to add this income to the rent to work out the total receipts. If this is more than £4,250 a year in total, you will need to pay tax on the excess, even if the rent itself is less than that,’ she added.
Also, if you use the scheme, you cannot also claim any expenses relating to the letting, for example, wear and tear, insurance, repairs, heating and lighting. ‘Therefore, you need to work out whether you will be better off joining the scheme or declaring all of your letting income and claiming expenses on your tax return. You may also need to arrange some liability cover which will protect you against accidents and injuries when someone is staying in your home,’ she concluded.