Rent a Room Relief is an optional way for renters to receive up to £ 7,500 a year tax-free by renting out a spare furnished accommodation in their main residence. This tax relief option was put into effect in 1992 as a way to help offer tenants a low cost option for furnished rooms and a guaranteed source of tax-free income for the renters. If one accommodation is rented out in the same residence by a co-owner, then the tax-free threshold is reduced to £3,750. The limit is applied even if you leave the accommodation for less than 12 months. If you earn more than the threshold of £ 7,500, you are required to complete a tax return. A tax return is not needed if you earn less than the given threshold by using the Rent a Room Relief option. 

 

Who is Eligible? 

 

You may opt into this tax-free option whether or not you own the household, are a resident landlord, run a bed and breakfast or guest house. You may not use this option if your home has been converted into separate flats, is not fully furnished, is being used as a place of business, and is not part of your main home when you rent it. 

 

As a leading Accountants in London, Taj Accountants encourages eligible clients to partake in this option to help relieve financial burden, promote work mobility, and receive tax-free income up to the allotted threshold. 

 

FAQs:

What if I move and rent in both my old and new home?

Renters opting into the Rent a Room Relief option must add up the income from renting both accommodations and will have to pay tax on any amount above the threshold. 

Does the Rent a Room Relief option apply if I rent out my home if I live abroad?

No, in order to qualify in this option the residence in which the accommodation is being used must be the renters main residence.   

Do I have to pay taxes if I surpass the £ 7,500 threshold?

Yes, if you or a co-owner earn more than  £ 7,500 combined you are required to file and pay taxes on any  income made above the £ 7,500 allotted amount.