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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!
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.
had a look at hmrc guidance on rent a room and cant see anything limiting the number of lodgers?
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.
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.
Which is defined here:
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!
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.
Chartered Accountant, Tax Advisor and Mortgage broker
(and BTL portfolio owner)
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.
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.
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.
In reality, lettings relief could quite likely remove any chargeable gain, but don't be surprised when this relief disappears retrospectively.
I think the reality is that most resident landlords wouldn't even consider the chargeable gain and will sell their PPR with full PRR.