Rent a Room Scheme
Heres a pleasant surprise, if you rent out a room in your home you can get up to £4,250 tax free income!
After 2016, thanks to SpareRoom, that's going up to £7,500 a year.
This is all due to a government scheme called Rent A Room, designed to encourage people to take in lodgers. Heres how it works :
- You let out a room or part of your main property (it can be a whole floor but not a self-contained flat).
- It must be furnished, unfurnished rooms dont qualify.
- You dont have to be a homeowner, if you have your landlords consent you can take advantage of the scheme as a tenant.
- If you dont normally fill out a tax return and the income is below £4,250 (around £350 a month) you dont even have to do anything, the exemption is automatic. If the amount you earn is above just let the tax office know.
If you usually fill out a tax return then consider whether youre better off in the scheme or not. Under the scheme you cant claim expenses for wear and tear, insurance etc. so you may be better off out of the scheme. If you spend more on decorating a room and keeping it in order than you make then youll be making a loss and not liable for any tax.
For more information, see our full guide to the rent a room scheme