Rent a Room and limited company contracting

[Maslins]

Unclear from the OP whether the "tenant" will be Yourco, or a "normal" human?

It does need to be an individual. If it is, then great, you can receive rent of up to £4,250/year without suffering any personal tax, and it won't impact on what dividends etc you can take.

If you were anticipating the tenant being Yourco, afraid you can't. See here.

[d000hg]

I asked my accountant as we have a lodger and was told it's pretty transparent - it doesn't affect your taxation. My wife and I own our house and IIRC she doesn't even have to declare her half (she doesn't do a SATR as she has a proper job).

[andy m]

Hi all and thanks for the responses!

For what it's worth the original opinion I queried was from my accountant! Perhaps I need a new one! I took the opportunity to clarify with HMRC via their online chat session (HMRC providing actually useful support!) and got the following:

Q: Hi. If I rent a room and choose to use the rent a room scheme the income (up to £4250) is "tax free". Does this income still count re: the higher tax threshold? I.E. If I earned £41,865 (assuming my personal allowance is £10,000) do I now have to pay higher rate tax on £4,250 of this as a result of earning the 'tax free' money through the rent a room scheme?

A: Hi, because the rent a room relief amount of £4250 is tax exempt, it would not be included in calculating your total income for higher rate tax purposes.

So it's all good and I've set my accountant straight too!

Thanks again!

[TheCyclingProgrammer]

Makes sense. I got confused because I'm sure in some places it's referred to as tax "relief" which is of course not quite the same thing as tax "exempt".

[northernladuk]

I imagined, as have some other contractors I've spoken to incidentally, that given that the rent a room allowance provides

Never take financial/tax advice from other contractors. They are a set of money grabbing mercenaries that don't know their arses from their elbows.