Rent a room tax relief
Rent a room tax relief
It is now thought that over 1.8 million UK adults rent out furnished rooms in their homes, which allows them to qualify for up to £7,500 in tax free income under the rent a room scheme.
HMRC have advised that £170m was claimed in the tax relief in 2023-24, but the number of rent a room landlords using the scheme is still relatively small, with only one in 10 room renters submitting claims in the last year.
The average rental income was only £3,580, which is significantly below the £7,500 threshold, with only 10% exceeding the figure in the reported 12 month period.
In total, 6% of UK households rent out a room, equivalent to around 1.8m homes across the UK where the owner acts as a rent a room landlord.
The latest HMRC research investigated the prevalence of the rent a room ‘landlord population’, and their use of the tax relief, which lets individuals earn up to £7,500 per year tax free from letting out furnished accommodation in their home.
Those taking advantage of the scheme tended to be more affluent with 27% of these landlords being higher or additional rate income taxpayers, versus 12% of all UK adults.
Of these, around 41% of landlords renting out a room had heard of the rent a room scheme, while 34% knew about the £7,500 tax-exempt limit specifically and only 11% rented to ‘strangers’!
When homeowners rent out rooms, there are a number of tax issues to consider, for example, The relief is up to £7,500 per annum and can be applied not only to rents received, but also to amounts received for related costs such as meals, cleaning and laundry.
The main conditions for the relief are that the taxpayer must occupy the property throughout along with the tenant and the let room must be furnished, part of the taxpayer’s home and used by the tenant for residential purposes.
The way people are charged for rooms also varied, with 3% charging rent to the people living with them, 3% charging for contributions to bills and other services, and under 1% ran a bed and breakfast.