Is it best to register as a business to let out lodges in my garden to students??

Question

I am considering building some student lodges on some land at the rear of my property. (4 in total) These will be self contained with bathroom, kitchen bedroom. In total I will recieve aprox 19k in rent per anum, but they will cost 20k to build, and supplying electricity will cost a fair ammount. I will not make any profit until year 2 or 3, but from there on this could be a nice source of income. My question is whether to start this as a business or just consider it as renting rooms out. The main concern is obviously tax, as i'd like to pay as little of that as possible!!!

This would be my first business venture, so i am cluelesss (at the moment) as to which way is best. If anybody could give advice, or point me in the right direction it would be much apprieciated!!!

Answer 1

Your best bet is to talk with an accountant to work out the most tax efficient way of setting up.  If you have a mortgage on the property, you may have to clear it with the company about using the premises for business, even if you're building separate accommodation.

There are tax advantages to running it as a company.  You can get capital allowances for setting up your lodges.  As an individual letting out accommodation, there are allowances towards repairs and maintenance.

If you're in the UK, it's worth talking to Business Link about starting up.  They have contacts with accountants who can give you the advice you need.

Good luck!

Answer 2

Dunno, but..

You will need public liability and indemnity insurance, and may want protection from civil law suits which may cost you your house.

If your house produces income then you will have to pay capital gains tax on it when you sell.

Talk to an accountant, 20K is not much turnover for a business and you may find the costs outweigh the benefits

Answer 3

I think you have to register if you are a landlord nowadays. Worth checking with Inland Revenue to keep yourself right.