Hello:
If anyone has the time I would like an opinion on claiming mortgage interest relief on a rent a room scheme. My daughter has a 2 bedroom flat and advertises a room to let via a well known website. If she claims relief for mortgage interest paid (outside the rent a room scheme) I would suggest to her that she claims one half of the interest as a deduction on the basis that the room and other facilities represent one half of the flat and that when the room is empty it is advertised and still available to rent, The other option is that the deduction is reduced by the number of weeks she isn't able to let it. Am I being too optamistic in the first suggestion and would HMRC allow such a deduction or does anyone have any other comments.
Thank you for your time..
Replies (4)
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Rent a Room or not?
Just to be clear, the term "Rent a Room Scheme" refers to the specific scheme allowing furnished accommodation to be let by a live-in landlord up to an amount of £4250 tax free each year, with anything in excess of this figure being taxable.
It sounds like you are talking about your daughter opting out of this automatic exemption and claiming actual costs instead (note using the Rent a Room scheme) - have either of you checked to see whether the costs including 50% of household costs would be more than the £4250?
Opt out or opt in
Hi Brian,
My sister in law asked the same question tonight and the advice is at https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...
I am not an expert (deal with company affairs exclusively) but it states there are two ways within the scheme. However the website says (https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme)
You can choose not to opt into the scheme and instead record your income and expenses on the property pages of your tax return.
You can then opt into the scheme and claim your tax-free allowance. You do this on your tax return.
Given the date my advice would be the same as I gave her. Pay it based on the total receipts less £4,250. Then work it out later for next year. In her case it was probable the £4,250 is the winner and she hadn't got receipts etc anyway. Unless you have an expensive loan and bills then 50% of the costs shouldn't exceed £4k anyway.
As far as deducting mortgage interest under Option A it is not referred to in the guidance. It would clearly be full deduction on an investment property. Probably need an accountant with relative experience on that one.