Renting Out a Room

My wife and I have decided to rent out a spare room in our house to provide some much needed additional cash in the current economic climate. I understand that if I receive a rent less than £4,250, I will pay no tax. Is this correct?

1st December 2009

The £4,250 tax free amount is available if you are using the “Rent a Room” scheme. Under this scheme, a taxpayer can be exempt from income tax on profits from furnished accommodation in their only or main home if the gross rent they receive is £4,250 or less.

If the rental income exceeds the £4,250 exemption limit, the taxpayer can choose to deduct either the exempt amount or the actual expenses incurred in connection with the letting, in arriving at the net assessable pofit for the year. 

Where the property in question is held in joint names, the annual exemption limit is split between each owner.  Therefore the rents will be assessed equally between yourself and your wife and the annual exemption will also be split equally between the two of you.

The “Rent a Room” scheme only applies to the furnished residential letting of living accommodation in the taxpayer’s own home. You cannot apply it where any rooms are let as an office or for any other business purpose. It is, however, possible to apply the relief for certain types of trade, such as a bed and breakfast business.  For more guidance on this, please contact your local TaxAssist Accountant.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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