{"id":707,"date":"2019-09-12T12:51:50","date_gmt":"2019-09-12T12:51:50","guid":{"rendered":"\/landlord-HQ\/?p=707"},"modified":"2019-09-30T08:28:27","modified_gmt":"2019-09-30T08:28:27","slug":"rent-a-room-scheme","status":"publish","type":"post","link":"\/landlord-HQ\/rent-a-room-scheme\/","title":{"rendered":"You could earn up to \u00a37,500 a year TAX FREE with the Rent a Room scheme"},"content":{"rendered":"\n

If you’re looking for a way to boost your income while making use of a spare room, the Government’s Rent a Room Scheme<\/a><\/strong> could be perfect. If you take in a lodger, you could make decent tax-free income from their rent.<\/p>\n\n\n\n

\"Room<\/figure><\/div>\n\n\n\n

What is the Rent a Room Scheme?<\/h2>\n\n\n\n

The Rent a Room Scheme is an optional scheme open to owner-occupiers or tenants who let out furnished accommodation to a lodger in their main home<\/strong>.<\/p>\n\n\n\n

You can earn up to \u00a37,500 a year tax-free<\/strong>, or \u00a33,750 if you’re letting jointly. <\/p>\n\n\n\n

This income limit covers everything you charge your tenants for as part of the rental service – so if you charge for cleaning, meals or laundry services you’ll need to count these fees in addition to rent.<\/p>\n\n\n\n

You also don’t necessarily need to be a homeowner to take advantage of the scheme: if you’re renting you could also lease out a room to a lodger, if your tenancy agreement allows it.<\/p>\n\n\n\n

Opting into the Scheme<\/h2>\n\n\n\n

If the amount you’re earning in rent is less than the threshold of \u00a37,500 per year (\u00a3625 per month), you don’t have to do anything. The tax exemption is automatic.<\/strong><\/p>\n\n\n\n

If your income from having a lodger is higher than \u00a37,500 per year, you must<\/strong> complete a tax return, even if you don’t normally. You can then either opt into the scheme<\/strong>, letting HMRC know this on your tax return and claim your tax-free allowance, or not<\/strong><\/em> opt into the scheme<\/strong>, in which case you should just record your income and any associated expenses on the property pages of your tax return.<\/p>\n\n\n\n

Advantages and disadvantages of the Rent a Room Scheme<\/h2>\n\n\n\n

Obviously, the biggest advantage of the scheme is the tax-exemption of any earnings under \u00a37,500.<\/p>\n\n\n\n

However, depending on your situation, this may be a disadvantage because you can’t claim any expenses related to the letting<\/strong>.<\/p>\n\n\n\n

If you earn more than \u00a37,500 through letting our your room, you’ll need to work out for yourself whether you’ll be better off in or out of the Rent a Room Scheme.<\/p>\n\n\n\n

\"Calculator\"<\/figure>\n\n\n\n

Example<\/h4>\n\n\n\n

Sarah charges her lodger, Becky, \u00a3650 per month to share her home. This adds up to an annual rent of \u00a37,800, so \u00a3300 more than the Rent a Room allowance of \u00a37,500.<\/p>\n\n\n\n

If Sarah stays in the Rent a Room Scheme, the \u00a3300 excess will be taxed at her top rate of tax: let’s say for argument’s sake she’s on the basic rate of 20%. Sarah will pay \u00a360 tax on Becky’s rent for the year.<\/p>\n\n\n\n

She could, however, opt out of the Rent a Room Scheme, therefore having the whole lot treated as normal rental income – so she can deduct expenses and only pay tax on the ‘profit’.<\/p>\n\n\n\n

Let’s assume that her expenses will total to around \u00a32,500 for the year. When these are deducted from the total rent received, she’ll be left with a profit of \u00a35,300 and therefore a bigger tax bill: 20% of \u00a35,300 is \u00a31,060.<\/p>\n\n\n\n

So, in this case, it’s more cost-effective for Sarah to stay in the Rent a Room Scheme.<\/p>\n\n\n\n

Things to check before you take in a lodger<\/h2>\n\n\n\n

If you’re the owner of the property <\/strong>and have a mortgage, you’ll need to check with your mortgage lender that you’re allowed to let out a room under the terms of your mortgage contract.<\/p>\n\n\n\n

You’ll also need to check with your home insurer that having a lodger doesn’t conflict with their terms.<\/p>\n\n\n\n

If you’re renting your home<\/strong>, you need to ensure that your lease allows you to take in a lodger.<\/p>\n\n\n\n

\"Checklist\"<\/figure>\n\n\n\n

You also need to make sure that the condition of your home<\/strong> is up to standard for taking in a lodger. That means it needs to be clean, in reasonable decorative order, free from vermin and hazards. Furniture must comply with fire safety regulations<\/strong>, and gas safety regulations<\/strong> will also apply. You also need to ensure that the electrical system<\/strong> and any electrical appliances you supply are all safe to use.<\/p>\n\n\n\n

If you’re a tenant, your landlord should<\/strong> be doing all these things anyway so you won’t need to do it again. If they’re not, you must contact them straight away<\/strong>.<\/p>\n\n\n\n

You are also legally required to check the immigration status<\/strong> of your permanent lodger. You could get a fine of up to \u00a33,000 for taking in a lodger without doing an immigration check. If you take in someone you know or suspect doesn\u2019t have the right to rent, you could get an unlimited fine, or a 5-year prison sentence.<\/p>\n\n\n\n

Does the Rent a Room Scheme apply to Airbnb and short lets?<\/h2>\n\n\n\n

Yes! <\/strong>At the moment, the Scheme applies to short-term rentals, so you can claim it if you run a bed & breakfast or use Airbnb.<\/p>\n\n\n\n

\"Lodger\"<\/figure>\n\n\n\n

Interested in renting out a room in your home? We can help! Take a look at our <\/em>guide<\/a><\/em><\/strong> to listing a room on our site<\/a>, and let us help you find a great tenant.<\/em><\/h3>\n","protected":false},"excerpt":{"rendered":"

If you’re looking for a way to boost your income while making use of a spare room, the Government’s Rent a Room Scheme could be perfect. If you take in a lodger, you could make decent tax-free income from their rent. What is the Rent a Room Scheme? The Rent a Room Scheme is an … <\/p>\n

Continue reading “You could earn up to \u00a37,500 a year TAX FREE with the Rent a Room scheme”<\/span><\/a><\/p>\n

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