The Rent A Room Scheme

Renting a room has always had benefits but now people who rent rooms out can get an added bonus of being tax exempt up to a certain amount.

The Rent a Room scheme allows people who take in a lodger to get up to £4,250 in rent without having to pay tax. The new scheme means landlords and tenants can take in a tax-free ‘gross’ income (before expenses) from renting their furnished accommodation.

In a time when everyone seems to be paying taxes for everything, it is a nice change to see the Inland Revenue giving something back. Many people have had to take lodgers in flat shares and house shares to help pay the bills and mortgages so being exempt from a lot of this income will be a nice relief.

Anyone can opt into the Rent a Room scheme, even if you don’t own your own home (although I would recommend getting your landlords permission), as long as the accommodation you are letting is your main living area for most of the time. It can’t be a holiday home or a buy to let property, and your lodger must be paying you to live there.

As usual though, there are some exclusions, the Rent A Room totals £4,250 a year for a homeowner, this total is the same for joint home owners meaning individually the relief is half at £2,125. It also only applies to furnished accommodation’s, and if the rent you receive goes above the £4,250 then you still have to pay tax above this threshold.

The Rent a Room scheme only applies when a lodger occupies a room or floor of your house, but not if you have converted your house into separate flats. If this is the case you will have to declare any income from renting these rooms tothe HM Revenue & Customs (HMRC) and pay tax in the normal way.


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