Although we all aspire to own vast portfolios of luxurious property, the fact is many of us don’t. However, you may rent on a smaller scale. Renting out a room in your house is becoming increasingly popular, and it’s a nifty little way of earning some extra money. By signing up to the rent a room scheme you can enjoy extra income from rent and also benefit from up to £7,500 tax free.
How it works
Rent a room applies only to owner occupiers/landlords who receive rent from letting furnished accommodation in their main home. Best of all, if your income from this letting does not exceed £7,500 you will be exempt from tax charges on your profit. The tax exemption is automatic, so if your profit does not exceed £7,500, you can sit back and watch the money roll in.
What if my income exceeds £7,500?
If your income from rent a room exceeds £7,500 you must complete a tax return, and you can choose to pay tax on either:
- Your profit from the property
- You gross income (before tax)
But don’t worry, we can help you every step of the way. If your income exceeds £7,500, Go to SimpleTax and file your tax return online, the easy way.
Responsibilities of a Landlord
Becoming a landlord brings with it certain responsibilities. If you rent out a room in your home, you’re responsible for:
- Repairs and maintenance
- Gas safety certification (annually)
- Rental agreement with your lodger
- Protecting your tenants deposit if your tenant has an assured shorthold tenancy
Why should I sign up for rent a room?
Clearly, the biggest advantage of the rent a room scheme is additional rental income, and the added bonus of £7,500 absolutely tax-free. However, there is one downfall. The rent a room scheme does not cover capital allowances/ replacement of property expenses. By this, we mean any expenses in the property, such as a broken boiler or replacing fixtures and fittings; you will not be able to deduct any of these expenses under the rent a room scheme. It’s up to you whether you perceive the costs of replacement to outweigh the additional income from rent, but this is certainly a great opportunity to earn some extra cash.
Other Keywords: tenant; rent-a-room; accommodation; bedroom; rental