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News – 18.11.24
International Men's Day - breaking the silence around men's mental health
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A change in US Presidency: How might it affect your finances?
In this article, we explore the potential economic and financial impacts of Donald Trump's return to power. … Read more
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The Rent a Room Scheme
When renting out a room in your own home, the Rent a Room Scheme allows you to earn up to £7,500 per year tax free. This is halved to £3,750 each where properties are jointly owned. This exemption automatically applies and therefore, those receiving rent for a room in their home for less than these amounts don’t need to report this rental income to HMRC.
Those receiving rent above the threshold must complete Self-Assessment tax returns but can still opt into the scheme for the first £7,500 of rent received to be non-taxable.
The Rent a Room Scheme doesn’t apply to second homes or rental properties.
Property allowance
Currently, a property income allowance of £1,000 per tax year is in place. Therefore, individuals who receive gross property income less than £1,000 per year aren’t required to report this to HMRC. However, the property allowance doesn’t apply to rooms in your own home and can’t be claimed alongside the Rent a Room Scheme.
HMRC has reviewed the data it received from online short term and holiday home rental providers to identify the individuals it believes have failed to report their rental income. These individuals will receive a ‘nudge’ letter which contains a Certificate of Tax Position.
If you’ve received a letter from HMRC, it’s important to note that there’s no statutory requirement to complete a Certificate of Tax Position.
However, as with all ‘nudge’ letters, they shouldn’t be ignored, as HMRC will follow up with those who don’t respond, potentially opening their own investigation. It’s therefore essential that appropriate specialist advice is taken on how to respond.
If any disclosure is required, the process should be managed carefully and the letter should be responded to within the stated deadline. By making a disclosure, you’ll have control over the process and will reach a settlement quicker than if HMRC were to open an investigation. This is because you determine the potential lost revenue, the behaviour that led to the non-compliance, and the level of tax-geared penalty.
If you knew at the time you should have declared rental income but consciously chose not to do so, or if you subsequently discovered you should have declared rental income but chose not to do anything to correct matters, HMRC’s Code of Practice 9 (COP9) Contractual Disclosure Facility is the most appropriate course of action to ensure you’re fully protected. If this is something that applies to your circumstances, we strongly recommend you seek expert advice before contacting HMRC.
Our award-winning Tax Investigations and Dispute Resolution team can guide you through the disclosure process. Our disclosure experts have a proven track record of assisting clients with disclosures of untaxed income. We are able to:
Get help with your short term property letting letter today: Please call +44 020 3820 4718 or fill out the form below.
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