I am considering buying a three-storey house. It needs substantial work doing to it. I am considering living in the lower ground floor myself, for privacy, with my own kitchen and bathroom and renting three rooms above with a shared kitchen, bathroom and communal sitting/dining room. Can I do this under the rent-a-room scheme? I am a basic rate taxpayer with rental income from abroad of around £12,000. Can I charge the tenants separately for electricity, Netflix, and a cleaner, so that I can get the maximum benefit of £7,500? Do I need a house of multiple occupation (HMO) licence to rent three rooms whilst living in the property myself?
Arthur Weller replies:
I presume (although I may be wrong) that your section of the property will have a separate entrance from the rest of the property. If so, please read HMRC’s Property Income manual at PIM4004, which implies that you are not eligible for rent-a-room. Furthermore, PIM4001 states: ‘gross receipts include not only rents but also payments made to the taxpayer for the provision of any other goods or services (such as meals, cleaning, laundry) in connection with the letting’. ‘Gross receipts’ means the £7,500 figure. With regard to the HMO licence, this is not a tax question.