Your property – making the most of bricks and mortar
Let rooms in your own home to one or more lodgers. Rent-a-room relief allows up to £7,500 of rent per property to be received tax free per year. The rooms must be let as residential accommodation in the home you live in, and no expenses can be claimed. If the gross rent is higher than £7,500, you need to declare the income on your tax return. However, you can then claim a deduction from the rent of £7,500 instead of the actual expenses incurred. Payments received under the Homes for Ukraine Scheme are not taxable and do not count towards the rent-a-room relief cap.
When you occupy a second home tell HMRC which of your properties should be treated as your main home for tax purposes. A property that has always been your main home is free of CGT on sale or disposal. Any other property that you used as your main home for a period will be exempt from CGT for the time you lived there, and (when you have more than one home) for any period for which you elected for it to be your main home. If a property has been your nominated main home at any time, the gain for the last nine months of ownership is exempt from CGT, even if you do not live there during that final period. You might not be able to nominate a property that is situated overseas. Review any properties that you let as short-term holiday accommodation. There are no longer any income tax advantages for furnished holiday lettings. However, if you provide a high level of services to short-term guests, the business might qualify to be treated as a trade. You would then be able to claim finance costs as a deductible expense – rather than these being restricted to a basic rate tax deduction – and you will avoid the additional 2% income tax on property income from 6 April 2027. Even without tax advantages, a furnished holiday letting will often be more profitable than a traditional buy-to-let, although considerably more work is usually required. A non-tax advantage of holiday letting is that this type of letting will avoid having to comply with the wide-ranging changes brought in by the Renters’ Rights Act – for example a ban on no-fault evictions – provided guests do not stay for more than 31 consecutive days. TIP Even if the income does not qualify as trading income, furnished holiday accommodation can still be registered as a business, so it qualifies for small business rates relief. A property in England has to be let on a commercial basis for short-term lets for at least 70 days over the previous 12 months. There are different rules in Scotland, Wales and Northern Ireland.
Let out your drive or garage for tax free cash. The property income allowance allows you to receive up to £1,000 income tax free from property that doesn’t qualify for rent-a-room relief (see above). This could be from letting out spare space in your garage – or even your drive – for commuter parking. If the gross income before deduction of expenses is no more than £1,000 you don’t have to report the income on your tax return. If the rent received is more than £1,000, you can deduct the higher of £1,000 or the actual expenses incurred, paying tax on the net amount. Property income allowance allows you to receive up to £1,000 income tax free
CHECKLIST
Consider renting out a room or space on your drive for tax-free income Nominate your main residence with
HMRC if you have more than one home Review any furnished holiday lettings to decide if this form of letting is still worthwhile
Made with FlippingBook. PDF to flipbook with ease