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Sam
Sam, Accountant
Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I live alone in London and own my home and have recently

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I live alone in London and own my home and have recently started letting out two furnished bedrooms to two lodgers generating an income of £14,000 per annum including council tax and all bills. The tenants/lodgers have access to other common areas in the home/garden so I am fully sharing the whole property with them. I pay £2100 council tax p.a. for the property (increased as I no longer live alone) and estimate the (also increased) heat/electricity/internet bills to be £1600 p.a.For tax purposes, I understand that I can choose between taxing the actual rental income "less all expenses” or the “gross income” by using the rent-a-room scheme with £7,500 deductible. As I have other income, I will definitively want to use the rent-a-room scheme to minimise tax on my additional rental income. Obviously expenses such as mortgage, repairs, painting etc. cannot be deducted in any way when using the rent-a-room scheme to get to the taxable income. My question concerns the deductibility of proportionate amounts of council tax/heat/electricity/internet expenses when using the rent-a-room scheme where I find the HMRC website to be unclear.My question: Can I deduct two thirds of the actual council tax and bills (i.e. £1400 + £1066=£2466) from my gross rental income of £14,000 for tax purposes ? I can of course split the gross rent into “rent” and “utilities” in the lodger agreement to support this. So I would have a taxable rental income of £14,000-£2,466-£7,500 = £4,034.

Hi, Sam here , one of the UK tax Experts here on Just Answer, thank you for your question and I shall reply shortly

HI

You cannot have the £7500 AND council tax as deductions - its either £7500 deducted leaving £6500 taxable OR actual costs from the £14000 which would be yes 2/3rds of all so council tax 1400 and other bills £1066 = £2466 = £11534

Thanks

Sam

Customer: replied 4 months ago.
Hi
Thanks for the response. Would it be legitimate for a tenant to pay a bill directly if I am claiming the tax-deductible £7,500 -
E.g. with a prepaid electricity bill where each resident would pay their apportioned costs of re-charging the account directly. In this case, I would not receive the (apportioned) electricity payment at all and thus not pay tax on it. Would that be legitimate ?

HI

No - as then you are going to have to resort to the rent less expenses route or the rent a room scheme is compromised due to bills not all being your to cover

Thanks

Sam

Customer: replied 4 months ago.
OK. Got it, thanks.

Hi

You are welcome, do let me know if I can assist further, or, if you have all that you need, it would be appreciated, if you could rate me foe the level of service I have provided, or click accept

Thanks

Sam

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