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  • Tax

    Capital Gains Tax for part time lodgers

    Hi,

    I am living in a 4 bedroom house, have 2 full-time lodgers and one Mon-Fri lodger.

    When it comes to paying Capital Gains Tax if I sell, how would the room that is let out Mon-Fri be treated?

    Thanks very much in advance for any help or advice!

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    There is disparity between the different tax systems. In theory there is a CGT liability if you let a room to a guest or more than 1 lodger, I'm not aware of this being enforced for lodger landlords or airbnb landlords, unless, of course, it is a business.

    Incidentally, the VOA assesses Business Rates on properties with more than 6 bed spaces available for let.

    The Rent a Room scheme promotes income tax allowance/exemption on 2 lodgers, although this is actually taken from the HMO exemptions.

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    HI GARY

    had a look at hmrc guidance on rent a room and cant see anything limiting the number of lodgers?

    https://www.gov.uk/rent-room-in-your-hom...oom-scheme


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    You may have a potentially unlimited number of lodgers - but only the first £7500 of rent is tax free - and of course one may be creating an HMO with a certain number of different households.

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    That's because the rent a room scheme doesn't limit lodgers, it only limits income. The lodger limit is a reference to HMO exemptions.

    https://www.legislation.gov.uk/ukpga/200...chedule/14

    Which is defined here:

    https://www.legislation.gov.uk/uksi/2006/...ion/6/made

    Ah, Landylordy has already answered! Maybe the links will be useful.

    Once you get onto the subject of households and who is to be treated as a household it gets very interesting!

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    As Gary says rent a room relief provides exemptions so it does not affect PPR but if it does not qualify then your PPR will be restricted and there will be a CGT liability.

    please remember selling your home is subject to CGT but you get relief call PPR. AirBnB may limit this relief if it does not fall within the rent a room scheme.

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022

    I'm at the limit of my knowledge and you may well be aware of exemptions that I haven't discovered.

    Its my understanding that the rent a room scheme is only applicable to income tax, I've not discovered any exemption for CGT. From PIM4001 'Under rent-a-room a taxpayer can be exempt from IT on profits from furnished accommodation in their only or main home if the gross receipts they get (that is, before expenses) are £7,500 or less for tax years from 2016-17 onwards.

    From HS283 'If you have more than 1 lodger, or if you let part or all of your home at any time in your period of ownership, the let parts will not qualify for Private Residence Relief.' which I understand to give a CGT exemption for 1 lodger but not for any other type of let.

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    Yes so you have relief for one lodger. Any more and its basically a business and you get lettings relief.

    I probably should have reread the post saying 3 lodgers. Lettings relief will apply though.

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022


    Yes, I liked that decision. Mr Hammond scrapped the shared occupancy test from the Rent a Room scheme and added it to the Lettings Relief instead.

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    In reality, lettings relief could quite likely remove any chargeable gain, but don't be surprised when this relief disappears retrospectively.

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    I think the reality is that most resident landlords wouldn't even consider the chargeable gain and will sell their PPR with full PRR.

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