Rent a room relief can provide a helpful simplification when a lodger is taken in. Some will be surprised to think of a tax implication when renting a spare room to a lodger but the income is considered as Residential Property Income.

 The relief provides an allowances of £7,500 per year. If gross rental income is less than this amount, no reporting to HM Revenue & Customs is required. Given this would allow for a room to be let at £625 per month it will be relatively helpful to many. Also if the gross rent is more than the allowance it will still be helpful as it can effectively act like a flat rate expense. For example a room let for £700 per month would yield £8,400 per year. Using the Rent a Room Relief the taxable income would be reduced to £900.

 There are some requirements to qualify for the relief

• The accommodation must be furnished
• The room must be let in your main residence
• There is no other taxable income resulting from the property. For example if an unfurnished room was also let then they would not be eligible to claim the relief, even for just the furnished element.

 It is also important to remember the relief is per property, not per room or per owner. For example a married couple letting a room would each have an allowance of £3,750.

 Care should be taken to ensure the rental income is calculated accurately. Total rent would also include additional payments made by a lodger for services such as laundry and meals. These would need to be factored in when deciding if the allowance removes any requirement to report the income to HM Revenue & Customs or determining the taxable surplus.

 We hope you have found this article useful. If you have letting income and would like to see how we can help you and give piece of mind please give us a call or send us a message.

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