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My house has three floors, with part of the ground floor forming a self-contained part with kitchen/diner, shower room/toilet and a bedroom. I am considering living on the upper two floors while I do not need all the space and letting part of it out to help pay down the mortgage.

I believe that because the ground floor part is self-contained, the Rent-a-Room scheme would not be applicable if letting it out and thus any rental income from it would be taxable at my normal tax rate (unless I could take into account an amount of mortgage interest, proportional to the area, perhaps one third or one quarter)?

However if at the same time I let out a room in the two floors above, where I live (sharing living room, kitchen and/or bathroom), would that qualify for the Rent-a-Room scheme?

Thank you.

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  • What is the Rent-a-Room scheme you keep referencing? Is that jargon, a legally recognized procedure in your jurisdiction, or what? Also, an answer would require looking at your local municipality's zoning codes, city ordinances, state law, etc. For instance, a set-up like that, where the basement is inhabited by another individual and it contains all the regular housing facilities, e.g., bathroom, kitchen (or kitchenette), etc., is called an English Basement and totally legal in Washington, DC (I only know that because I lived in one for a year). But it will vary across jurisdictions
    – A.fm.
    Commented Jul 29, 2017 at 16:25
  • Now linked. My understanding is that if eligible, the first £7500 of rental income per year is tax exempt, however expenses, repairs etc. cannot be subtracted from the rental income under this scheme.
    – nsandersen
    Commented Jul 29, 2017 at 22:41

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I spoke to Revenue & Customs. The room within the top two floors can be rented out under the Rent-a-Room scheme; the self-contained part cannot.

If doing both at the same time, any unused part of the £7500 tax exemption can only be used against income from the room, it cannot be used against any income from the self-contained part, which would be fully taxable (minus allowed deductions, which include a fraction such as 1/3 of mortgage interest).

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  • Glad you were able to find your answer! Cheers!
    – A.fm.
    Commented Jul 31, 2017 at 19:48

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