Rent a room scheme with short term let. Is it possible?

J

Johnpackt

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Hi Guys,

I have recently purchased a home worth 380k in Dublin and have mortgage around 340k. I have been living here since last few months and have started short term letting which is working well. I have a big back garden with good space on the side of the of the house. I plan to do an extension where I can build a studio room which will be attached to my house. Have not started getting quotes yet. But I reckon it would be somewhere around 50k-70k. I have two questions related to this:
  • Can I utilize rent a room scheme for the extension and continue short term let and pay 52 percent tax on it(14000+50%tax on short term letting)? or rent a room scheme wont work here because I have short term letting in the property.
  • For extension I was planning to get a loan but because of no credit history getting very high rate. Recently from this forum came to know about mortgage top up, can I use it over here.
Thanks in advance for answering.
 
Johnpackt said:
because of no credit history getting very high rate.
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Can you explain this, its not something I have heard of before.

If the extension is part of and accessible from your house, then the same 'rent-a-room' applies. But your max is 14k per year.
 
AFAIK your extension must have a door to the rest of the house in order to fall under the rent a room scheme
 
Merowig said:
AFAIK your extension must have a door to the rest of the house in order to fall under the rent a room scheme
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Not true. It can have its own separate entrance as long as it is part of the main house. But I think it has to be part of the original house not new.
 
Johnpackt said:
Hi Guys,

I have recently purchased a home worth 380k in Dublin and have mortgage around 340k. I have been living here since last few months and have started short term letting which is working well. I have a big back garden with good space on the side of the of the house. I plan to do an extension where I can build a studio room which will be attached to my house. Have not started getting quotes yet. But I reckon it would be somewhere around 50k-70k. I have two questions related to this:
  • Can I utilize rent a room scheme for the extension and continue short term let and pay 52 percent tax on it(14000+50%tax on short term letting)? or rent a room scheme wont work here because I have short term letting in the property.
  • For extension I was planning to get a loan but because of no credit history getting very high rate. Recently from this forum came to know about mortgage top up, can I use it over here.
Thanks in advance for answering.
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1. Rent a room wont work for new build. It has to be part of original structure not necessarily with shared entrance. It can have seperate entrance.
2. Short term let - I think you may be bound by legislation over the coming rental periods that it cant continue to be short term all the time - you have to offer a full lease at some point?
3. If you build a new space you can rent it but your planning application must specify this. You can rent it then but pay tax at your rate on the proceeds less deductible expenses.
4. The easiest way to do rent a room is to share house with someone and that qualifies or maybe build the new bit to give yourself space and carve out a single space inside the house. Tricky tho.
I do rent a room and its no fun being a landlord and you cannot claim expenses against costs but you do get it tax free but cannot raise the rent over 14k per year - that 14k per year is inclusive of ALL costs so that includes ESB and other charges your tenant pays to you so it cant be 14k per year rent PLUS ESB etc as that triggers full tax over 14K income. Right now if I went full market price to rent I'd probably make more than I do rent a room but I dont want to do it because of leases/ tenants rights - nightmare if left with difficult tenant.
 
While rent-a-room can be applied to a self-contained unit, the planning for any such development now will almost certainly state that letting is not permitted.
 
Leo said:
While rent-a-room can be applied to a self-contained unit, the planning for any such development now will almost certainly state that letting is not permitted.
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I imagine so. But poster can still avail of rent a room as part of the house without any planning.
 
Also very difficult to get finance for a building to rent if planning is an issue. I'd try rent a room inside my house and try to get a self contained unit there with agreed shared spaces.
 
Johnpackt said:
Hi Guys,

I have recently purchased a home worth 380k in Dublin and have mortgage around 340k. I have been living here since last few months and have started short term letting which is working well. I have a big back garden with good space on the side of the of the house. I plan to do an extension where I can build a studio room which will be attached to my house. Have not started getting quotes yet. But I reckon it would be somewhere around 50k-70k. I have two questions related to this:
  • Can I utilize rent a room scheme for the extension and continue short term let and pay 52 percent tax on it(14000+50%tax on short term letting)? or rent a room scheme wont work here because I have short term letting in the property.
  • For extension I was planning to get a loan but because of no credit history getting very high rate. Recently from this forum came to know about mortgage top up, can I use it over here.
Thanks in advance for answering.
Click to expand...
"Short term let" = "holiday let" and does not qualify for the rent-a-room scheme, which is supposed to be for licensees only.
You might want to check this guide here https://www.citizensinformation.ie/...renting_your_property_for_shortterm_lets.html and a more tax focused one here https://www.revenue.ie/en/tax-profe...ains-tax-corporation-tax/part-04/04-01-20.pdf

I presume you want to build a self contained dwelling as an extension, a so-called "Granny flat" - you will need to seek advice from planning dept of your local council as some have different policies, but in general you are allowed build a self contained extension up to 40m2 for family use only without PP (and subject to normal considerations around boundaries, open space, access etc). If you intend letting it however, might need full PP. https://eldron.ie/granny-flat-ireland-information/ Obviously if you decide to ignore this, the consequences can be severe, and you can be left with a devalued property, so worth getting the best legal advice you can before proceeding.

Lastly, mortgage top up would be complicated if you are building a standalone extension to rent rather than simply extended out the existing house. You'd need to seek advice from a mortgage broker on this. I don't think it would be considered a PPR loan but an investment mortgage so likely to have to pay a higher rate of interest in that case. Again, get advice. Your neighbours most certainly will complain loudly if they see you adding an extension to put out as a short let, so make sure its all done above board.
 
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