As hundreds of homeowners rent out their rooms and houses to provide accommodation for this year’s Wimbledon tennis tournament and others rent driveways or sell strawberries and cream, the tax man may take time to sample what’s on offer, say leading tax and advisory firm Blick Rothenberg.
Stefanie Tremain, a partner at the firm said: “His Majesty’s Inspectors of Taxes have always taken a close interest in money making activities during the Wimbledon tennis tournament and this year will probably be no exception, especially as we know that hundreds of houses have been let out to players, officials and tennis fans.”
She added: “Hamptons have rented out over 40 properties in the Wimbledon area and once again residents will be cashing in on the thousands of spectators that will arrive from the UK, Europe, and the rest of the world, renting out driveways for parking, selling cold drinks and refreshments and even strawberries and cream.
“But they need to be cautious and make sure that they declare to the Revenue what they earn where they need to. If they don’t, they could face hefty fines and penalties and their activities might well spark an unwanted investigation into their finances.”
Alison Purdue, a director and head of lettings for Hamptons International in Wimbledon said: “We are always at pains to make sure that those that wish to let their properties understand that this is not ‘easy money.’ If they rent out a house, they need to have both gas and electrical safety certificates in place. They also need to ensure that they declare what they owe and of course we as responsible estate agents are required to report what payments are being made to them.”
She added: “Many just simply let their homes for the duration of the tournament and go on holiday. It always a balance between what a property owner thinks the property will rent for and what those taking part or visiting the tournament will pay. Many players and those that support them do have a limit and are on a budget.”
Alison added: “This year’s tournament is seeing a very buoyant market with houses renting at up to £15,000 a week, four-to-five-bedroom houses renting for £7,000 a week, three-bedroom houses renting for up to £1,800 a week and one- and two-bedrooms flats fetching £1,550.00.”
Alison said: “There has been huge interest this year from residents wishing to let their properties but also from people who are attending the tournament who wish to rent. These range from individual players to umpires, a company renting a large property for corporate entertainment to individuals who just wish to have their own space when they are attending the tournament. Four-to-five-bedroom houses close to the tournament in SW19 and SW18 were at a premium and even up to the last minute both landlord and renters were making enquiries.”
She added: “One major technical company supporting this year’s event have rented a property for its staff while another house has been rented to umpires.”
Stefanie Tremain said: “Renting your property out can be extremely lucrative but Wimbledon residents need to play the game and follow HMRC rules. Failure to do so can result in fines, penalties and in the worst-case scenario, where the Revenue feel that they have been defrauded, they could end up in court.”
There are two allowances which may help Wimbledon residents with small amounts of extra income.
Stefanie said: “The trading allowance exempts the first £1,000 of trading income per annum and would cover, for example, selling strawberries or bottled water from outside your home. The second allowance covers the first £1,000 of rental income, which would include income from letting out parking spaces or driveways as pitches for traders. If a taxpayer does not already file tax returns and their trading or rental income is below these allowances they do not need to tell HMRC, but if the income exceeds these allowances the taxpayer may need to register for Self-Assessment.”
She added: “For those individuals renting out rooms in their own homes the income can be tax-free provided it doesn’t exceed certain thresholds. The ‘Rent-a-Room’ scheme generally applies to taxpayers who are living and physically present in the property during some part of the letting period. The relief is separate to the rental income allowance and the two cannot be used together.”
Stefanie said: “Gross receipts of up to £7,500 may be received before tax is due. This limit applies to a tax year and whilst it can be reduced to £3,750 per person if the property is owned jointly, it is not reduced according to the letting period. Under the scheme, expenses cannot be deducted from the gross income and any excess income above the £7,500 is taxable. The alternative method available to taxpayers is to tax all rental income and claim deductions for allowable expenses.”
She added: “For individuals who are already registered for Self-Assessment, any rental income must be reported on their annual Tax Return regardless of whether the ‘Rent-a-Room’ scheme applies, and the appropriate box should be ticked to claim the relief. For those not already in Self-Assessment and whose rents are below the relief threshold, the exemption applies automatically, and it is not necessary to register.”
Stefanie said: “If ‘Rent a Room’ relief does not apply the rental profits are taxed at the taxpayer’s marginal rate. Whilst expenses relating to the letting can be deducted to arrive at the profit, it is important to remember that mortgage interest relief is now restricted.
“Those that rent out their homes or indeed provide other services need to understand that estate agents are required to report income but also that the Revenue have huge powers to investigate either philocaly or electronically.”
She added: “HMRC’s electronic system ‘Connect’ routinely collates information from over 30 databases including details of taxpayers’ salaries, bank accounts, loans, property, and car ownership. HMRC also has the power to request one-off bulk data from third parties where there may be cause for concern. The system allows HMRC to look at taxpayers’ day to day activities even down to ticket sales and passenger information supplied by airlines.”
Stefanie said: “The penalties for failing to declare income correctly and promptly can be significant. For those taxpayers not in Self-Assessment the deadline to register is 6 months after the end of the relevant tax year (by 5 October 2024 for income earned in the 2023/24 tax year). The penalties for submitting a late tax return start at £100, rising to over £1,000 plus up to 100% of the tax due, depending on the date of submission and whether HMRC consider that the taxpayer has deliberately withheld information. Interest will be charged on late payments of tax and late payment penalties may also be charged of up to 15% of the tax due, depending on when payment is made.”