Q. I have a spare bedroom in my apartment and am seriously considering renting it out to get some extra cash in, a friend mentioned there is a government scheme called The Rent a Room Scheme, can you tell me more?
A. Many home owners today are choosing to become resident landlords. You become a resident landlord if you let out part of a property which is your only or main home. If so, you’ll have certain rights and responsibilities. You’ll be responsible for keeping the property safe and in good repair, a tenant or lodger doesn’t have the right to challenge the agreed rent, you can give less notice to end a tenancy than if you rented out the property as a whole. The Rent a Room Scheme lets you earn £4,250 per year tax-free from letting out furnished accommodation in your only or family home. You can let out a room or an entire floor. You can choose whether or not to join the scheme. If you’re not in the scheme, you’ll pay tax on your rental income after letting expenses like wear and tear, insurance and repairs. If you are in the scheme, you’ll only pay tax on rental income you get over £4,250. Rental income includes money you get for extra services you provide, like meals and laundry. You won’t be able to claim any expenses.
The £4,250 allowance may be halved if someone else in the property – like your partner – also receives income from letting.
You can opt in to the scheme at any time if:
- you’re a resident landlord, whether or not you own your home
- you run a bed and breakfast or a guest house
You can’t use the scheme for homes converted into separate flats.
How to get the allowance
You’ll get the tax exemption automatically if:
- you don’t normally receive a tax return, and
- the yearly amount you get in rent, plus income from extra services you provide, is below £4,250
If you get more than £4,250, you should complete a tax return.
If you want to opt out, complete a tax return and declare the relevant lettings income and expenses on the property pages.