If you provide furnished accommodation in your main or only home, (whether you own or rent the property), you should be able to use the Rent-a-Room Scheme. The Rent-a-Room Scheme allows you to receive up to £7,500 tax-free per annum (2017/18). 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 accommodation for less than 12 months.
There are some conditions to meet to qualify for the Rent-a-Room Scheme, but they’re not difficult to achieve. You can’t use the Scheme if the accommodation is:
- not part of your main home when you let it
- not furnished
- used as an office or for any business
- in your UK home and is let while you live abroad
The list above is not exhaustive of all the conditions of the Rent-a-Room Scheme.
If your gross receipts from letting aren’t more than the Rent-a-Room limit of £7,500 (or £3,750), you don’t pay any tax on your rental income.
If your gross receipts are more than the limit, you may still be able to benefit under the Rent-a-Room Scheme because you can opt to deduct the Allowance of £7,500 (rather than your actual expenses). This may be beneficial if your actual expenses are less than £7,500. If you opt to deduct the Allowance rather than your actual expenses, you cannot create a loss.
Your gross receipts include rental income (before expenses), any amounts you receive for meals, goods and services, such as cleaning or laundry and any balancing charges.
If you’d like to discuss the Rent-a-Room Scheme further, please do not hesitate to 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.