The Rent a Room Scheme from the government allows property owners and tenants to make up to £7,500 in tax-free income per year. If you're letting with someone else, this amount is reduced to £3,750. However, if your earnings are more than the threshold, you need to let HMRC know that on your tax return to claim your expenses or keep a record of them and state it on your property pages of your tax return.
It is important to note that the Rent Room Scheme is separate from other rental schemes, such as AirBnB. You are not eligible for the scheme if you are using different platforms than those designated by HMRC, which are covered by other tax-regulation for rental income.
Who is Eligible for the Rent a Room Scheme?
The Rent a Room Scheme is open to any property owner or tenant who has let out furnished accommodation. This can include lodgers, long-term tenants or short-term guests staying in your home. As long as you are providing the room and associated utilities (such as heating and internet access) then you may be eligible for the scheme.
It is also important to note that the room must be available for rent for at least part of the tax year in order to qualify for the scheme, and you can only receive income from one person or couple at a time. If you are letting out your room or property for commercial or business purposes (such as an Airbnb rental), then you are not eligible for the scheme.
How Do I Claim Rent a Room Tax Relief?
If your rental income is less than the7,500 threshold (or3,750 if you and someone else are letting together), then you don't need to do anything additional in order to claim tax relief. However, if your income is more than the threshold, you will need to do one of two things.
- The first option is to let HMRC know on your tax return that you are claiming expenses against your rental income. You can do this by filling out the relevant sections of your property pages on the self-assessment tax return. Remember to inform HM Revenue and Customs within 1 year of 31 January after the end of tax year.
- The second option is to keep a record of all expenses related to the rental and then state them on your property pages when filing your tax return. This can include any repairs, maintenance costs, insurance or utility bills that you have paid for in relation to the rental.
The scheme is a great way to support your income, for example, if you are on universal credit the money that you make from rent a room scheme won`t be counted as income up to £7,500
It is important to note that if you live on your own and get %25 discount on your council tax bill, it will cease when you enrol rent a room scheme.
In conclusion, the Rent a Room Scheme from the Government is an excellent way to make income tax-free (up to £7,500 or £3,750 if you are letting with someone else). As long as you are providing furnished accommodation and associated utilities, then you may be eligible for the scheme. Once your rental income exceeds the threshold, then you need to inform HMRC on your tax return and keep a record of all related expenses. If you are looking for an additional source of income and don`t mind having someone stay in your home, then the Rent a Room Scheme is something that should definitely be explored!