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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15977
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I rent a room to a lodger in the flat which I own. He frequently

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I rent a room to a lodger in the flat which I own. He frequently works from home as he is self employed working as an environmental consultant (he also goes on site visits and to meetings in London/ Milton Keynes), but I do not allow him to hold business meetings in the flat as I understand this would affect my insurance premiums. My question is whether I am eligible for the rent a room scheme, which I see from the online materials specifically excludes space rented as an office. I would argue I am letting the room to him as furnished accommodation, not as office space, but I don’t see why he shouldn’t be allowed to work from home. This year I expect to receive less than the threshold of £4,250 in rent. HMRC are demanding payment of some tax now (they say I missed a deadline on 31 Jan) because I was self employed doing some freelance work last year. However, I am not doing any freelance work this year and other than the rental income, all my income is PAYE this year. Can I simply say to HMRC that I am no longer self employed and have no tax liability for this year in addition to my PAYE?

Based on what you have said in your question, I can see no problem with you claiming relief under the rent a room scheme even though your tenant is self-employed and does some work from his room. He is predominantly renting the room to live in and not specifically to use as an office. Take a look at PIM4001 here and PIM4002 here.

If you had completed a tax return for 2012/13, you could have put a date of cessation of your self-employment and the tax office may not have issued a tax return for 2013/14. There is still time to do that. Alternatively, call the tax office on the number here and tell them the situation as regards XXXXX XXXXX situation for 2013/14. They may agree to cancel the issue of a 2014 tax return or tell you to submit a 2013 tax return. If you have submitted one, they may amend it for you while you are on the phone to reflect the fact that your self-employment ceased in 2012/13.

I hope this helps but let me know if you have any further questions.
Customer: replied 4 years ago.

Thanks Tony this is helpful.


I did submit a tax return for 2012/13 and I did state in that my self employment ended in October 2012 or thereabouts. Nevertheless they are still asking for payment for this year. I wonder if they have made a mistake?


I think I will call them as you suggest. When I call them should I mention the rent a room scheme and my lodgers' self employment or is it best not to complicate things?



You need to apply to reduce the 2013/14 payments on account to £0 assuming that all the tax you have to pay for 2013/14 will be collected through PAYE. You should also make sure your tax code for 2013/14 is correct.

To reduce your payments on account for 2013/14 to £0 call the tax office on the number I gave you a link to in my previous post. They will do it while you are on the phone. It is something you could have done in your 2013 tax return on the tax calculation pages buy many people miss it.

Don't mention your lodger's business. I don't think you will have a problem with it but there is no point in answering questions which haven't been asked.
Customer: replied 4 years ago.

Thanks Tony.


I have just spoken with HMRC and they are doing as you say- reducing payments on account to zero for this year but keeping me on the self assessment system because they asked a long list of questions including about rental income so I needed to declare that, and on basis of current forecasts I will be over the threshold for the scheme next year. They asked if the room was rented "for residential purposes only" to which I said yes.


Do I now need to stipulate anything to my lodger about what he claims back as expenses in terms of his self employment? For example, he may be thinking about claiming rent and bills as 'business expenses.'






You have let the room as for use by the tenant for residential purposes in good faith, not for business purposes and I cannot see that being challenged by HMRC. However, if you want to take a belt and braces approach you might ask the tenant not to claim a proportion of the rent he pays as a business expense.

You can read about the use of home as office rules starting here.
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