Enterprising individuals looking to make the most of their proximity to the route of Saturday’s (19/05/2018) Royal Wedding should be aware that HM Revenue & Customs (HMRC) will be looking for any undeclared income, said accounting, tax and advisory firm Blick Rothenberg.
This ranges from renting out the entire house, a parking space along the Royal Wedding route to catch the parade, selling souvenirs marking the occasion and providing food and drinks on the day.
Nimesh Shah, partner at Blick Rothenberg, said: “Residents of Windsor will naturally find their properties in high demand this weekend. The rise of websites such as Airbnb demonstrates the popularity of short term lets and taxpayers should bear in mind that if potential customers can see their advertisements online, so can HMRC.”
He continued: “Even a relatively small amount of additional income can lead to a tax liability; however, two new annual allowances were introduced last year which can help with such situations. The trading allowance exempts the first £1,000 of trading income per annum and would cover, for example, selling strawberries or bottled water from outside your home. The second allowance covers the first £1,000 of rental income, which would include income from letting out parking spaces or driveways to eager watchers. For those individuals renting out rooms in their own homes, the income can be tax free provided it doesn’t exceed certain thresholds.
“Many people could be on to a real winner as renting their house along a prime spot to catch the married couple could pay the mortgage for the whole year. For example, some properties were marketed for rent at £2,000 - £3,000 per night across the Royal Wedding weekend. However, this income may need to be declared to HMRC.”
Additionally, gross receipts of up to £7,500 may be earned before tax is due. This limit applies to a tax year and whilst it can be reduced to £3,750 if the property is owned jointly, it is not reduced according to the letting period. Under the rent-a-room scheme, expenses cannot be deducted from the gross income and any excess income above the £7,500 is taxable.
As HMRC have announced an intention to review the rent-a-room relief to ensure it is more aligned with long term letting arrangements, cashing in during the Royal Wedding may be one of the last opportunities for such short term lets to benefit from the relief which applies to owner-occupiers and tenants who receive rent from letting furnished accommodation in their only or main home but can also be claimed by those running bed and breakfasts or guesthouses.
The relief is separate to the rental income allowance and the two cannot be used together.
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