Is the rent now taxable?

Firblog

Hi, I've been renting out a room in my house, not paying tax as per the rent a room scheme.

I recently got married and will be changing my PPR to my OH's.

Will I now have to pay tax on the rent from the room in my own house? or does the PPR not matter as long as I spend most of the week in my own house?

Cheers

downtheroad

"Your main residence is your home for most of the year and where friends would expect to find you."

https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/land-and-property/rent-a-room-relief/what-type-of-residence-qualifies.aspx

gipi

Your rent a room licencee may become a tenant when you move out, you should check that out. A tenant has many more rights than a licensee (person who shares house with owner\landlord).

Xander10

https://www.boards.ie/discussion/2058351433/is-the-rent-now-taxable

You will no longer qualify for rent a room relief. Tax will be payable on any taxable profit after allowable expenses

Firblog

As far as I understand a person can only have one principal private residence, is that not considered my main residence? - which would not be 'my house'.

Buddy Bubs

The answer is yes, it's taxable. You could choose not to pay tax and take a chance, loads of people do this.

Interest and penalties though if a decision goes against you.

Iscreamkone

Also, any future growth in value of your ‘old house’ will be taxable when you sell up. CGT

aristotle25

https://www.boards.ie/discussion/comment/122130528#Comment_122130528

Thats not quite the defintion.

e.g.(from https://www.auctioneera.ie/capital-gains-cgt-tax-calculator )

If you lived in a property for a period of time but also rented the property for a period, the gain that accrued during the period in which you lived in the property is not taxable for CGT purposes. Calculate the full gain, then you can exclude the percentage of that gain that occurred while you were living at the property. So if you made a €100,000 gain on a property that was your private residence for 5 years and rented for an additional 5, the taxable gain would be 5/10 X €100,000 = €50,000. If you did live in the property for a period of time, simply input this into our calculator below and we will take that into account.

KaneToad

I think you already know the answer OP. Your new home with partner is 100% your PPR. Keeping a room in your old house to maintain the licencee arrangement is all well and good until you get caught (if ever). But, in these circumstances, it can often be a jealous family member/neighbour or a disgruntled licencee who can rat you out.

Firblog

Smart move then would probably be to say goodbye to the licencee - hello Ukranian ARP renter

wildwillow

Definitely consider your licencee as a tenant if you move. They will have all the tenant’s rights and you willl have the obligations. And you will be liable for tax, need to inform your lender and insurance company.

Iscreamkone

Do you need to inform your lender? Why?

SodiumCooled

Rent a room relief makes no reference to PPR. It states that you can have more than one residence but the relief can only be claimed on your main residence - if you are still living in the house which is unclear and you spend more than half your time there I don’t see a reason why it would not be eligible - it would be where your friends/family would expect to find you which is again part of the wording in the relief rules.

Dav010

Consider whether you are happy to become the LL of a tenant, and all that will entail. If I were you, to make a clean break, evict the licensee and look into the Ukrainian scheme, €800 tax free, no tenancy, you have the benefit of having your house back whenever you want/need it.

Peregrinus

https://www.boards.ie/discussion/comment/122130816#Comment_122130816

Because they may want to put you on the interest rate they apply to a mortgage on an investment property, as opposed to a mortgage on a home.

Mrs OBumble

https://www.boards.ie/discussion/2058351433/is-the-rent-now-taxable

If you are spending most of the week in a house, how can it not be your PPR?

Iscreamkone

https://www.boards.ie/discussion/comment/122131668#Comment_122131668

They may want to do that. I don’t think you are legally bound to inform them though. I wouldn’t tell them anything and carry on making repayments at the current rate. They will not come near you once repayments are being made on time every month.

Peregrinus

https://www.boards.ie/discussion/comment/122131687#Comment_122131687

As to whether you're legally bound, I'm going to hazard a guess that the terms of your mortgage agreement, which is legally binding, do require you to notify them. I'd be astonished if they didn't.

(And of course you do have to notify your insurer, and you will want to do that, because you don't want your insurance policy to be void. Your lender's interest in the property will be noted on your insurance policy, so they may hear of the change in status from the insurer, even if they do not hear of it from you.)

Iscreamkone

I agree that you need to tell your insurers but I would not tell your lender.

I have first hand experience of not telling the lender.

Dav010

https://www.boards.ie/discussion/comment/122131901#Comment_122131901

Have you first hand experience of them finding out?

Iscreamkone

https://www.boards.ie/discussion/comment/122132559#Comment_122132559

16 years after changing from ppr to rental I sold the property.

Dav010

https://www.boards.ie/discussion/comment/122132945#Comment_122132945

Again, did the bank find out? If they hadn’t, did you check your mortgage to see if you were in breach of contract?

Just because you took a chance and weren’t found out, doesn’t mean there would have been no ramifications if the bank became aware you no longer resided in the home they financed.

Iscreamkone

The bank didn’t find out because I didn’t tell them.

Firblog

https://www.boards.ie/discussion/comment/122131674#Comment_122131674

From what I understand, married couple can only have one PPR, my OH's house is now ours; so I don't think I'm eligible to claim the rent a room allowance…

I suppose the easiest way to find out would be to ask revenue.

Pawwed Rig

https://www.boards.ie/discussion/comment/122134574#Comment_122134574

That is correct. A married couple can only have 1 ppr.

Do your sums and determine whether you want to keep the house or sell up