Guest bedding sorted ✔️
Guest towels sorted ✔️
Tax sorted?   

Renting out your home for special events can be lucrative but have you thought about the tax implications?  

With the imminent arrival of the 147th Open at Carnoustie I find myself running around organising spare beds, extra bedding and towels for paying guests staying at my house for the event. 

My partner John on the other hand is excited by the prospect of lots of ‘golf chat’ with one special guest, a caddie for a high-profile golfer playing in the tournament.  Due to the confidentiality agreement I have signed, I cannot possibly divulge who is sleeping in my spare bedroom this week! 

Staying with Lauren:

Whilst John dreams of his improving his golf handicap, I am dreaming of my potential claim to HM Revenue and Customs for ‘rent a room’ relief.  This relief means that John and I can each receive up to £3,750 of gross rents completely free of income tax.  Where a property is occupied by one owner, the relief is £7,500.  The exemption is automatic if you earn less than the threshold. 

The position would not have been as straight forward had I let my entire house. 

Staying at Lauren’s

Had we let our entire house, my dream of claiming ‘rent a room’ relief would have been shattered.  Rent a room is only available where the owner occupies the property whilst the property is let.  Without the relief, the rental income less any allowable expenses would have been taxable.  Broadly speaking, allowable expenses could have included letting agent’s fees, additional insurance costs and other direct costs relating to the letting such as the cost of telephone calls and stationery. Tax relief for the cost of buying spare beds and bedding etc may not have been available.

We may also have had the hassle of having to register with HMRC for a Self Assessment Tax Return for one year to report the rental income and expenses and pay over any tax due. 

If we had let our entire house for less than £1,000, we may have qualified for a new ‘property allowance’ that came into effect on 6 April 2017. By claiming this allowance, we could have earned up to £1,000 free of tax in the tax year. 

Choccie loveheart or not?

With the Senior Open at St Andrews later this month, Glasgow hosting the 2018 European Championships next month, Scotland is on a global stage.  Those cashing in on such sporting and social events should consider the tax implications, along with whether to leave a choccie love heart on the bed or not for their guests! 

Get in touch with any member of personal tax team to find out how we can help.