With players and spectators alike congregating in SW19 for the Wimbledon tennis championships, many local residents are taking advantage and letting out rooms, if not their houses. Although most will focus on the tennis, the Institute of Chartered Accountants in England & Wales (ICAEW) has warned that HMRC will be ‘hawk-eyed’ about rental income and tax due on it.
With the tournament starting on Monday 25th June and lasting for two weeks, many local residents take advantage of the opportunity to let their home on a short-term contract. Other summer events where neighbourhoods can make some extra income include Cowes Week, Henley Regatta and Goodwood races. However homeowners are reminded that it is their duty to inform HMRC of any tax liability and not to wait until they are chased.
Anita Monteith, Tax Manager at the ICAEW, said: “If you rent out a room in your own home, this can count as residential lettings, but you can take advantage of the Rent a Room scheme. This allows you to receive tax-free income of up to £4,250 from letting rooms in your own home each year.
“If you let out all or part of any property and receive rent, this is treated for tax purposes as if you are running a rental business. It doesn’t matter if you let just one small flat or many different properties, for tax purposes they will all be treated as a single business. Rent (after expenses have been deducted) is regarded as part of your total UK income as a taxpayer.”
The ICAEW has also warned that HMRC is prepared to chase even small amounts of tax and will take evasion of tax on short-term letting income very seriously. To avoid being caught out, the ICAEW recommends that all such additional income is declared on the self-assessment form and that homeowners should seek professional advice if in any doubt. The income will be taxed at a marginal rate and it may be possible to offset certain costs, such as letting agents’ costs and any mortgage interest paid whilst the property is let.
As well as tax issues, people should also consider other consequences of short-lets such as damage to property and problems with collecting payment from tenants. Further information can be found at www.hmrc.gov.uk