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.
If you would like more information, please contact us today! You can call 0800 2294020, or complete the short form on this page and we’ll get back to you shortly.
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.
Are you a landlord looking to switch accountants? Look no further! Fusion Business Services has an expert Landlord Accountancy team to assist with the running of your property portfolio. To schedule a free consultation or to discuss how Fusion Business Services can help you with the running of your SPV company, please call 0800 229 4020.