My partner is paying me rent - are there any tax implications?

[rainydays1234]

My partner is paying me rent and it has just come to my notice there could be tax implications to this?

Being honest what he pays covers his share of bills and food- although we call it rent.

Do you think I should be doing anything specific around this to ensure I'm not penalised in any way?

For a start make sure he calls it bills &food on the payment reference.

How much per year?

£500 per month

It's getting complicated because I'm in the process of doing either a tenancy agreement- which sets out how much he pays, puts timings around it, and leaves the option for rent raising each yea.

Or doing a cohabitation agreement, which may be more appropriate in the interest of avoiding tax, and for us feeling it's more like a partnership and relationship- rather than a business arrangement

It only came to my attention because my solicitor said I'd need to seek separate legal advice on tax

It would be covered by the rent-a-room allowance so nothing to declare to HMRC and no tax to pay.

I was advised not to draw up a tenancy agreement in very similar circumstances, as it would mean I should be filing a self assessment for the money I was 'making' as being the landlord.

However it also meant that at mortgage renewal I couldn't take his contribution into account. Rather than paying you cab you get him to pay for stuff directly? This may be easier..

I have no experience of a cohabitation agreement so any info on that might be interesting?

Isn't there some rule about letting out a room (lodger) tax free up to a certain amount a year. Presumably if he is just paying towards bills that should be tax free, adult children do that all the time.

Set up a joint account for bills?

Actually that's incorrect. The OP needs to declare it to HMRC on her tax return so she can claim it as tax-free (she only does nothing if her TOTAL combined annual income is less than £7.5k) and opt in to the rent a room scheme.

https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme

Surely that is not necessary for a partner living with her?

Save everyone a whole load of hassle and stop calling it rent.

Call it 'expenses contribution' or something else instead.

From that link

The tax exemption is automatic if you earn less than £7,500. This means you do not need to do anything

£500 a month is under £7,500.

Thanks for your messages,

There are a few issues really. He has some bad debt that he's not cleared yet and I don't. So having a joint account is out.

I spent A LOT of money on my house before he moved in with his children, so I feel it's only fair he actually pays rent to acknowledge the situation- and not think 'great we can live for free'

The amount he pays shouldn't really cover food- but for various reasons it is. But I want it to be rent and bills and food is dealt with separately- I suppose I could raise the amount to include food.

Also it would be good to set it out clearly on an agreement.

I think the potential downside of a cohabitation agreement is it's designed to replicate the protection you get in marriage. But on this occasion I don't want to ensure all my assets are split with my partner- that's one of the main reasons we're not getting married.

Hope I don't sound too mean. Took me 9 years to get out of my marriage, with legal wrangling. Now lucky enough to have met love of my life- but want to ensure everything is set out as clearly as possible.

It's only because I'm investigating drawing up a tenancy agreement.

But could avoid calling it rent on a cohabitation agreement I suppose

Yes, ALL earnings. I assume OP has a job (or some way she is paying her mortgage/rent) so has other income rather than just the £500 he's paying her.

"The Rent a Room scheme is open to owner occupiers or tenants who let out furnished accommodation to a lodger in their main home. It allows you to earn up to £7,500 a year tax-free"

This is irrespective of what else you earn.

@rainydays1234 what does your accountant say?

I don't have an accountant as have only ever worked as an employee, earning annual salary, so have never done tax return or anything

I’m a tax adviser and have had a lodger in the past…. You def don’t need to tell HMRC if it’s under the allowance, regardless of your other income.

I think now might be a good time to go and see one. Your issue is that it is your partner and not a lodger. This may or may not change your tax position. If your solicitor has suggested it might, then a quick consultation with an accountant will clear it up.

Ok thanks everyone. I feel a lot better for getting it all out in the open. Life is complicated isn't it?

It doesn’t make a difference if it’s a partner or lodger.

Solicitors just have to mention the tax implication caveat to cover themselves. The OP doesn’t need an accountant.

Ok thanks @ChristmasPuddy

Is your partner renting a separate room in the house?

He can't be a tenant or a lodger under the rent a room scheme if he's sharing your bedroom. But it sounds like he's contributing to household running costs in your shared home in which case it's not taxable income and doesn't need declaring anywhere. (Unless there are UC benefit implications but I don't deal with those professionally). It's part of a family arrangement.

The legislation I think off the top of my head was ITTOIA 2005 Section 786.

You need to clarify if he's a lodger or tenant (which is unlikely) or actually just a partner in the same bedroom.

If that's the OPs decision, then fair play. Personally, I would prefer to take the advice of a qualified professional (which some posters may well be) in preference to receiving an unexpected tax bill.

In the past I had a lodger, and I also had a letter from HMRC asking me what the money was for that was being paid into my bank account 🤷‍♂️