HM Revenue and Customs (HMRC) have issued a warning to homeowners who are seeking to make extra income by renting rooms out for short periods to those seeking accommodation whilst attending events such as Glastonbury and Wimbledon. Such income is taxable and the tax man will be looking out for taxpayers who receive rental income but do not declare it on their tax returns.
Under UK tax law, doing anything for the purpose of making a profit is a trade, and profits of a trade are taxable, so letting out a room in your house during an event is creating taxable income, to the extent that the income derived exceeds the cost. Doing so may cause you to come under the scrutiny of HMRC. This will normally lead to a letter indicating that they believe that a full return of income may not have been made, and inviting you to inform them of any omitted income. The specific omission is not mentioned, often leaving the taxpayer bewildered because they might not realise that the money they have received is taxable.
It is also often not appreciated that, in most cases, having a simple rental agreement prepared (the cost of which will be tax-deductible) is highly advisable. Also, the impact on your insurance arrangements needs to be considered. Renting out a house or part of your house, even for a short period, may invalidate your insurance cover on the property and/or its contents during the period of the rental. If the property is mortgaged, having tenants may be a breach of the mortgage terms.