Let room or whole house: which is more tax-efficient?

[saveallmymoney]

Hi All,

Please forgive this over simplified question. I am looking at moving and renting my house out.

If i have a house that will rent for 800pm and i'm a 40% tax payer then i will receive about 480 after tax.

However if i retain the house as my "primary residence" and just rent a room out, i can get the first 4,250 tax free under the "rent a room" scheme? As a bonus i can come and go as i like to check on things, and use the garage for storage.

Have i understood this right?

Daniel.

[Telometer]

You also (in scenario 1) can obtain a tax deduction for mortgage costs, insurance etc. etc. Your profits will not be so high as 800pm.

In scenario 2, if you have no mortgage etc. you could rent a second room, the excess over 4,250 taxable at 40%.

[TaxationPete]

If you 'live' somewhere else as your 'home' then rent a room is not available to you as you would not be in residence. As you do not live there just visit. Regards Peter