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  • Tax

    Income Tax: new tax allowance for property...

    https://www.gov.uk/government/publicatio...ing-income

    Possibly old news, but I've just found this. It appears it is available to all landlords.

    As a resident landlord does this mean I can now earn £8.5k from lodgers before tax? (£7.5k RAR plus £1k)

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    You're nearly there!  I thought it was 9k personally but that was as a result of the big PR push to have the rent a room allowance upped from its previous limit of somewhere around 4 or 4.5k a year.  The argument was that the relief had not increased in line with housing costs for a very long time. 


    You'll find what you seek on here. Relax it's not a quack website. It's a government site! (oh the irony....)


    https://www.moneyadviceservice.org.uk/en...-tax-rules



    Adam.

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    Perhaps Not ? "

    The allowances will not apply in addition to relief given under the Rent-a-Room Relief legislation."

    https://www.gov.uk/government/publicatio...ing-income

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    I think this £1000 additional allowance was meant to cope with those who dabble a bit with eBay  etc

    Of course with lodgers it really is irrelevant as evasion is so easy.

    Bearing in mind the new HMO licensing  regime which I presume applies to lodgers as well  then all lodger LL  will do is restrict lodger numbers to 4.

    Very few LL  will declare any amount above the RFR allowance.

    Govt should just accept the reality and allow live in LL  to make any money they can out of their property. .

    By all means restrict lodgers  to no more than four

    With a 5 bed house a live- in LL could make about  £30000.

    Not many would do so as having 4 effective strangers in one's home is  not something that normal domestic couples would want. .

    But it certainly beats being a normal LL.

    I will be attempting to buy a 5 bed house and I will take in 4 lodgers and I will not be declaring any rents in excess of £7500.

    The property will not be an HMO as far as the new mandatory  licensing scheme is concerned

    Whether it is under other classifications wouldn't concern me at all; I wouldn't licence it if required  like in Southwark

    I will make more money out of lodgers  than I ever can  out of tenants.

    My 5 bed PPR would not apoear on any licensing scheme  as I would have no more than 4 lodgers from two or more households

    So if there were two lodger couples I would have two empty bedrooms so as to not exceed the total of 4 lodgers. The downside for the couples would be that I would expect double rent for their two rooms.

    That wouldn't make much sense  so for lodger couples  it would be better if they each took a room and then used one for themselves and the other for other things.

    Potentially  could make the two spare bedrooms into mini lounges  for the two lodger couples.

    Yes it would mean adjusting bedroom furniture  around  and possibly buying mini lounge type furniture.

    So I would still be receiving 4 lots of full lodger rent  and the couples would have two bedrooms to use as they wished which I would be happy to facilitate

    So on an average £600 lodger rent per month that brings in a tidy tax evaded free £30000

    If you save the lodger income in a few years you could buy outright any residence where you could have 4 lodgers again but full tax would .have to be paid in this instance though I guess for the 2nd residence I would only have lodger income of no more than £7500!!!!!!!!

    Obviously  there are many issues with this strategy

    5 bed properties in a lodger desirable area aren't common.

    4 bed properties seem to be easier to source  so that will tend to be the max possible.

    That still means 3 lots of lodger income at £1800 pcm.

    I know if I could I would be looking for a 5 bed property which met all the room size requirements  for couples per bedroom even though not needed.

    But it would future proof the property  if there were  ever 5 lodgers as then the rooms would be HMO compliant

    A bit unrealistic  I know. Now it seems to me the ideal 4 or 5 bed property for a live -LL  is a town house.

    They tend to have 2 bathrooms and have bedrooms on different floors.

    So I consider the town house as the ideal for a live- in LL  with 4 lodgers.

    Trouble is affordable  5 bed town houses are a bit thin on the ground!

    Though I guess a 4 bed house should generate sufficient  tax evaded lodger income from 3 lodgers  to pay for a loft extension after about 3 years of that lodger income

    Of course with potentially two residences bringing in about £22000 from 3 lodgers increasing to £30000 per property when the two loft extensions are completed could provide a rather nice lifestyle

    The live-in LL  could be on permanent  holiday once the loft extensions are completed.

    Once a month he returns to his two residences to sort out anything and to maintain  the quality of residental occupation  for PPR  purposes

    One could rent a rather nice villa in Portugal or Spain for about £700 pm.

    Ryanair returns you to the UK very cheaply!

    Somehow  it could be afforded from the eventual £60000 lodger income! !!!!!!

    So this will be my new aspirational strategy to beat S24

    I will become a live-in LL with no more than 4 lodgers  so as to avoid mandatory  HMO licensing.

    I wouldn't ever bother with selective HMO licensing like with Southwark Council for more than 2 households.

    I would evade that licensing.

    The beauty with the lodger strategy is the PTB cannot easily detect who is occupying a private residential home and therefore the ability to evade all sorts of things is possible.

    Just keep it sensible.

    No more than four  lodgers in each residence.

    I reckon  to have 3 residences with lodgers would be pushing credulity  a bit far with HMRC.

    Would only work if you were an Arab Prince!!

    I see many S24 LL  using the lodger strategy  to replace the tenant one.

    But as is well known there simply aren't enough 4 or 5 bed affordable  properties to maximise the lodger strategy

    Lodgers tend to want to be near expensive areas for transport limks etc.

    But I know if I could I would sell all my properties  and try to buy a decent 5 bed town house near a train stn with direct links to London.

    It seems to me that as a retirement strategy you could have one PPR with lodgers  and one unencumbered  property with lodgers with tax paid on just £7500 lodger income   with the live -in LL  on almost permanent holiday anywhere in the world.

    A nice little villa on the Algarve appeal to me! !

    For me all pie in the sky currently.

    The other thought would be perhaps a wide beam canal boat on a constant cruiser licence.

    Just return to your homes once a month

    You can buy a brand new  WB canal boat for about  £100000.

    Lodgers could become the new BTL

    It would certainly shrink the number of properties required to generate a decent income; great for all those FTB!!!!!!!

    I would happily  forego capital growth  on multiple  rental properties if I could drag in £60000 lodger income per year.

    I think my strategy is just a bit unrealistic  due to the cost of 4 and 5 bed homes.

    But it is all food for thought

    Even if  you declared all lodger rent above £7500 it would still be worthwhile.

    Would be great if you could buy two 5 bed town houses adjoining  each other! !!

    One on a resi mortgage the other unencumbered!!

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    Brilliant post Paul, keep thinking...

    You haven't got to C3(b) and C3© usage yet!!!

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    I would simply evade that.

    Nobody is going to tell me how many lodgers will be in my home and  they won't know

    I won't be telling anyone either

    I don't care what the regulations are.

    If I can I will make as much lodger income out of no more than 4 lodgers.

    Just seen a 4 bed property 15 mins walk  from BS stn reduced from £375000 to £355000

    Now I know I can source 3 Cabin crew at £600 pcm each

    Nobody will know I have them as lodgers.

    I might show two of them paying no more than £7500 per year.

    I'm amazed at the price drop in a matter  of months!!

    It has certainly  got me thinking

    Convert my portfolio to one unencumbered 4 bed house  and have 3 lodgers .

    No more S24 to worry about and no more tax on my property income  ever! !!

    That would give me a gross income of about £23000 plus pension and eventually the SP.

    That little lot will add up to about £40000!!!!!

    Can't wait til I'm 67!!!

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    Hi Paul

    I am picking up from your posts that you don’t like paying tax! Lol

    How about buying a house with an annexe. You can live in the annexe and have lodgers in the house. Or maybe make part of the house self contained.

    Do you pay for a TV license?

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    Not for lodgers

    Tax I pay elsewhere

    But nobody is going to tell me how much I can earn out of my home

    If that means I evade tax on lodger income then I will.

    Lodgers  are such a minority situation though because most people have complete domestic circumstances  so can't  use the lodger route or not to the same extent as me.

    Fortunately  I am domestically unencumbered! !!

    So I have more opportunity  than most to game the system.

    But really for me it is all just so much talk.

    I am simply not currently in a position  to do anything I have suggested.

    Just good to chew the proverbial fat etc!!!!

    No I don't pay for a TV licence as I don't have my own home.

    My live -in LL  is over 75 so the TV licence is free.

    But I do have a TV licence for one of my rental properties  where I charge an inclusive  rent

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    Lodger deposits would still need to be registered and protected, I think HMRC access the info.

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    WRONG

    Lodger deposits are CURRENTLY not legally required to be protected though they can be on a voluntary basis.

    However I would suggest that soon you will be correct as Govt is reviewing the RFR A.

    Then I consider  that Govt will require lodger deposits to be protected.

    So to avoid Govt tracing lodgers just don't take a deposit.

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