Hosting Students: Tax & Benefits

If you are considering hosting students, or you are an existing Host, you need to think about the effect extra income from hosting students will have on the tax you pay and any benefits you receive.

If you receive income from hosting students, some of that income may be tax-free under specific circumstances, but all income must be declared to HMRC for tax purposes, and, if you receive state benefits, to the Department for Work and Pensions (DWP), as this extra income may result in you paying more tax or receiving less benefits.

All prospective and current Hosts must be aware that it is your responsibility to keep your own tax and benefit affairs in good order. If LAL Torbay is asked by HMRC or the DWP to disclose the income a Host has received from hosting our students, we are legally obliged to do so in full.

The Accommodation Department is occasionally asked about the effect of payments received for hosting students on Income Tax. We cannot comment on individual cases. The general information provided here is for guidance only, and is only considered to be correct at time of writing. We will not be held responsible for any inconvenience, financial loss or other detriment to you on account of this information. If you have specific questions we ask that you consult an accountant or the local tax office.

The Devon Area tax office can be contacted at Regent House, Hardaway Head, Queen Street, BARNSTAPLE, EX32 8RR. Telephone 0845 366 7830.

It is the responsibility of all Hosts to make sure that they declare all income from hosting students to HM Revenue and Customs (HMRC). You must be aware that, if this organisation asks LAL Torbay to confirm amounts paid to Hosts, we are obliged to answer these requests honestly and in full.

Under the Rent A Room scheme, some income from providing accommodation can be earned tax-free. There is short advice below, but full details are at http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4017804

If you fill in a self-assessment tax return, advice on the Rent A Room tax exemptions can also be found in Help Sheet HS223, which is available on the HM Revenue and Customs website.

The following is brief information from English UK.

Tax allowance

The first £4,250 earned from student lettings is free of tax. As long as the total income you get during the year from letting accommodation to students and from providing them with meals is no more than £4250, you do not have to pay tax on that income. If the Tax Office doesn’t send you a tax return you do not even need to tell them about this income. If you do get a return, all you have to do is tick a box to confirm that your rental income is £4,250 or less.

If you share your house with one or more people (for instance, as a married couple) and one of you lets a room to a lodger, the whole exemption will go to the person actually renting out the room. If you let the room jointly, each of you will get half the exemption, which is £2125.

What happens if the total income is more than £4,250?

In that case you can choose between

• A: paying tax on the total profit you make from letting the room or
• B: paying tax on the amount of rent over £4,250.

If you choose A, you work out your profit by taking your actual expenses away from the total rent you received. If you choose B, you will need to let your Tax Office know within one year of the end of the tax year. So if you had income from letting a room during the tax year ended 5th April 2008, you must let the Tax Office know that you want to be taxed on this basis by 31st January 2010.

If you receive Benefits from the DWP, you must declare any income from hosting students, whether or not it will affect your Benefits.

The DirectGov website gives more information about your requirement to declare your income. It states "You must report any change in your circumstances to your local Jobcentre Plus office as soon as it happens, whether or not you think the change is directly related to your benefits" and warns that "If you deliberately fail to report a change in your personal circumstances you are treated as having committed benefit fraud. If you're prosecuted for benefit fraud you could be fined or get a prison sentence." (www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/BeginnersGuideToBenefits/DG_4016267 on 30th January 2009).

You can check entitlement to Benefits online at http://campaigns.direct.gov.uk/benefitsadviser/ 

We remind you that it is your responsibility to inform the DWP of any change in circumstance, and that LAL is obliged to answer in full any requests by the DWP to disclose monies paid to Hosts for hosting our students.