The Rent a Room Scheme allows owner-occupiers and tenants to receive tax-free rental income if you provide furnished accommodation in your only or main home. Continue reading to find out more.
Rent a Room Scheme Overview
For the tax year 2023 to 2024, the annual Rent a Room limit is £7,500. This reduces to £3,750 if someone else receives income from letting accommodation in the same property, such as a joint owner. The limit is the same even if you let the accommodation for less than 12 months.
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Qualifying for rent a room relief
To qualify for this relief, certain conditions must be met:
- Property is not let to a business, storage or office, but to a lodger. You may be able to use the scheme if your lodger works in your home in the evening or at weekends or is a student who is provided with study facilities
- It is a furnished letting
- During the tax period, it is the individual’s only or the main residence
- The arrangements of letting do not contain any other income that could be taxable
- No further relief is available, e.g. expenses can not be deducted. This is important to consider as the income from goods and services (if any) supplied along with rent a room becomes par to rent a room income, e.g. cleaning, food, laundry etc.
- To meet residence requirements, the property, which could be a boat, caravan, building or part of the building, must be occupied as a single residence.
- The relief cannot be used for letting a permanently separate part of the building, e.g. an annexe. However, where a building is divided temporarily, such as a flat in the basement, you may be able to claim the tax relief.
For more information, please visit the government’s website.
Applying for rent a room relief
An election should be made to apply for rent a room relief. You could elect to dis-apply the rent-a-room income treatment and instead treat the income as normal rental income. It is a matter of tax planning as if a loss has occurred due to a rent a room activity; that loss could be offset against any other property income in the year.
Or if the rental income from rent a room activity is above the relief amount of £7,500, then election could be made to be taxed on an additional income. However, no further expenses would be allowed.
You usually count your gross receipts for a tax year – that’s from 6 April one year to 5 April the next. However, if your letting activity amounts to a trade, you count your gross receipts for your basis period.
For further information about rent a room relief, please visit the government’s website.
Contact us today
For more information about rent a room relief, please give us a call on 0800 2294020 complete the short form on this page.
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