On your marks! Get set to let your spare room during the Olympics
Take advantage of government schemes that allow you to add to your income without having to pay tax.
Sunday 20 March 2011
The race is on for Olympic tickets. With millions of Britons having a month to apply for their favourite events, no doubt many people's minds will be turning to where they will stay during the games.
It's no surprise that many homeowners in Stratford and the surrounding areas of east London are eyeing up the opportunity to let out rooms and flats for the duration.
But the accommodation could be for anything – from the royal wedding to Badminton horse trials and carnivals – and more people in these credit-tightened times are looking to rent a room or their whole property for a special occasion.
Several things need to be taken into account if you want to do this, such as getting in touch with the council and your insurance company as well as contacting HM Revenue and Customs and your mortgage lender.
The procedure for short and long lets is the same. Matt Hutchinson of spareroom.co.uk says: "Some mortgage contracts have clauses which preclude subletting and you should check this carefully and get in contact with your mortgage provider. Your insurance company may have to arrange extra cover and you may have to pay more council tax."
A tax break is in place to help you to maximise income and you can save even more if you are diligent with keeping detailed records of income and outgoings. The rent-a-room scheme allows you to earn up to £4,250 per year while letting a room in your own home without incurring any extra tax.
The Government says you can take advantage of the scheme if you let furnished accommodation – a room or an entire floor of your home – to a lodger who pays to live in your home, sometimes with meals provided, and who occasionally shares the family rooms.
Under the rent-a-room scheme terms and conditions of a mortgage contract will not usually be breached, but problems can arise if you are letting a whole property. Jane Chichester, a spokeswoman for the Council of Mortgage Lenders, says: "Many lenders will say if you are letting your property for just a couple of weeks, then it does not matter. Others might levy a charge. If you are letting your house for longer, or if you are not there, then it becomes a buy-to-let. The risk becomes different because you are no longer an owner-occupier."
The scheme also applies if you are subletting, but you cannot use it if your home is converted into separate flats that you rent out, if you let unfurnished rooms, or if you rent out the whole house. Here you must declare rental income to HMRC and pay tax in the normal way.
"For people who want to rent out a room in their own home, the Government's rent-a-room scheme provides a welcome tax break," says Camilla Shaughnessy of short-term property let specialists Eventful stays.com. "For letting a holiday or second home all income is liable to tax, but this can be offset by deducting other income. So you keep a record of all heating and utility bills and other outgoings and this can be deducted from the tax you pay. In this situation you will also need to arrange some public liability cover. For most four-bedroom homes we would recommend £1m of cover. This will cover you against accidents and injuries when someone is staying in your home."
Using your home for a commercial reason such as letting it or having a tenant is unlikely to be covered by most standard home contents policies. "At the very least, consumers should inform their insurer," says Emma Parker of the Financial Ombudsman Service, the free service set up by law to handle consumers' financial complaints.
"It is also common for there to be exclusions under home contents policies in relation to items that go missing when someone is legally entitled to be in your home – such as a houseguest." Accidental damage may be covered depending on the policy terms and conditions.
"The insurer will decide, depending on the circumstances, whether or not the existing policy remains valid to cover the new arrangements," says a spokeswoman from the ABI. "Effectively, if you rent the entire property out, this could then be seen as a business arrangement and domestic home insurance policies may not cover this. Insurers may charge an extra premium for the duration of renting the property out, or a separate, small commercial policy may be needed on top of the usual policy. It is also worth bearing in mind that the risks will be greater if the owner is not staying in the house as opposed to just renting a room out."
Says Emma Parker: "We see few complaints about this issue, but where we do, typically the consumer is disappointed that a claim has been turned down as the insurance company says that the consumer has not 'disclosed' important information. We're unlikely to uphold a complaint like this if a consumer has not given honest answers to clear questions."
People who wish to let their family home to three or more unrelated tenants may also find they are restricted from doing so by their local council, by planning permission laws called Article 4 Directions. The National Landlords Association has criticised authorities wishing to do this and has launched a campaign claiming the "administration will be disproportionate to the benefit and reduce the available resources in this time of austerity that are needed for tackling more pressing issues facing local communities".
Chris Knight, a spokesman for the NLA, says: "This could have an impact on short terms lets for the Olympics – but the only London borough pursuing this is Redbridge. It means that people wishing to let even in the short term here will technically have to apply for planning permission from the council. But in practical terms it is unlikely the town hall will go on a prosecution spree after the Games."
Gareth Lewis, 52, business consultant
Gareth Lewis from Islington hopes to rent out his four-bed flat for £1,500 a week for holiday periods, but hopes to get nearer to £2,000 a week during the Olympics. Camilla Shaughnessy from Eventfulstays.com gave him the idea when they met on holiday in Toulouse in France. "And like all these ideas it gestated for a while," he says. Renting out your home while you go away can help to cover the cost or even pay for a holiday. "Now I plan to let my flat regularly when I go away. I'm going to Venice in half-term in October and have got a let arranged for then."
It is not just a flat you may want to consider letting. Raj Joshi is a 64-year-old council worker from Cardiff who rents out the parking space in the front of his house during major sporting events at the Millennium Stadium. "For an extra charge I am happy to drive people to the game," he says.
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