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Tax on sub-letting

Practical Issues
GoSeigen
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Tax on sub-letting

#511767

Postby GoSeigen » July 5th, 2022, 9:24 am

Here's a rental situation with plenty of non-standard aspects to complicate it:

My wife and I rented a residential property in the UK as our main home.
-Pre-COVID we decided to move overseas intending to spend part of the year abroad and part in the UK.
-Our oldest child wished to complete his studies in the UK so he remained living in our rented home while we were abroad.
-We agreed with our landlord that we could grant a licence to another family to occupy part of the property while we were abroad effectively similar to a lodging arrangement. Their rent paid to us was roughly R12k per year --inline with the market but significantly less than our rent to the landlord because they only had a licence and were providing meals and transport for our son.
-This arrangement continued until our son left school last year and our subletters moved out and we gave notice to our landlord.
-In the circumstances we were unable to visit the UK because of very restrictive lockdown rules making it uneconomical and impractical.

So how does this affect our tax?

I'd assumed that we would benefit from the rent-a-room scheme but looking at the rules it seems 1. there is a limit of £7500 which we exceeded in the one full tax year that we received rental income and 2. it doesn't seem to apply if you are living abroad and renting out your home in the UK and I don't know if the fact my son was still living there would be relevant.

On the other hand, if we don't use the rent-a-room scheme do we have to fill a return and declare the income and expenses? I am assuming there would be no taxable income because rent we paid exceeded the rent we received? But should we submit a return anyway? And would we also need to file a return for the partial tax years when the income was below £7500?

GS
P.S. Until moving abroad I did not need to file a return.

bluedonkey
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Re: Tax on sub-letting

#511775

Postby bluedonkey » July 5th, 2022, 10:09 am

I assume: you were paying rent on the UK home in question.

That rent, or a proportion, is part of the expenses that can be set against your sub-letting rental income.

GoSeigen
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Re: Tax on sub-letting

#511824

Postby GoSeigen » July 5th, 2022, 12:13 pm

bluedonkey wrote:I assume: you were paying rent on the UK home in question.

Correct.
That rent, or a proportion, is part of the expenses that can be set against your sub-letting rental income.


Any thoughts on whether self-assessment will be required? Not that I mind too much, I've done many in the past -- but would like to avoid it as the tax payable is going to be zero so all that effort for nothing.


GS


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