Government Rent a Room Scheme

Many people now rent out spare rooms in their homes to lodgers. The government rent a room scheme is open to those who do so. If you think you are eligible, you can apply to the Inland Revenue for tax relief under the rent a room scheme.

You can apply through your tax return and it is for anyone who is letting out furnished accommodation in their home. If you share your home with a partner or somebody else then the benefit is halved.

From April 2016, you could earn up to £7,500 from a tenant or tenants tax free under the scheme. You would need to declare the income via your tax return in order to be eligible.

There is no age limit so long as you are over 18, however you cannot use the scheme if you have converted your home into separate flats or if you are letting your UK home while you live abroad; or if it is used for any business. The criteria states that is must be a part of your main home and it must be furnished.

If you earn less than £7,500 from a lodger or tenant, then you are automatically exempt from tax on that income. Whilst a form needs to be completed, the Inland Revenue offers comprehensive guides to help with this.

Any income over £7,500 pounds shown as a profit is liable for tax in the normal way; however, this can be offset by the costs of furnishing and renting the accommodation to you.

As the landlord or landlady, you would need to provide receipts and proof of these costs.

In summary, you can pay tax on your actual profit from renting a room or you can pay tax on your gross receipts - £7,500 or £3,750 if you joint own it.

If you feel you need more guidance, it is worth taking advice from an accountancy professional or talking to the Inland Revenue directly.

June 2019