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bigduckontax, Accountant
Category: Tax
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Hello, I will earn circa 11,500 in income this year from

Customer Question

I will earn circa 11,500 in income this year from two lodgers living in my property. I also live in the property. The lodgers pay me a set amount each month which comprises their contribution to rent and all bills (such as utilities, council tax etc).
I am a higher rate tax payer.
My question is: am I better off, given the potential capital gains tax implications for when I sell the property, simply applying the lodger allowance of £4250 and paying tax on the remainder, or would I be better off declaring the full 11,500 and then deducting rent. If the latter, what exactly can I deduct? (there seems to be a lot of confusion on the internet).
Many thanks
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello Chris, I'm Keith and happy to help you with your question.
Here, from 'Which,' are those items that are tax deductible from rents:
'Allowable expenses a landlord can claim
The most common types of expenses you can deduct are:
Water rates, council tax, gas and electricity
Maintenance and repairs to the property (but not improvements)
Contents insurance
Interest on a mortgage to buy the property
Costs of services, including the wages of gardeners and cleaners
Letting agents fees
Legal fees for lets of a year or less, or for renewing a lease of less than 50 years
Accountant’s fees
Rents, ground rents and service charges
Direct costs such as phone calls, stationery and advertising for new tenants
The expense should be incurred wholly and exclusively as a result of renting out your property.'
As you can see there is quite a lot there to consider. You will now need to sit down with a wet towel round your head and the backs of lots of used envelopes to calculate which option exposes you to the less tax. The two routes are:
Rent less allowable expenses.
The 'Rent a Room Scheme' surplus over the GBP 4250 allowance.
The ball is now in your court. I do hope I have been able to simplify matters for you and shown you the way forward.