Rent a Room Relief

Rent a Room is designed to exempt up to £7,500 of rental income from tax providing certain criteria are met. 

Qualifying Criteria

1. The property must be furnished and be your main residence.
2. The area to be let must form part of your residence and not be separate. Granny flats, annexes and caravans/lodges in gardens are not considered eligible.
3. The property must be a residence. You cannot use Rent a Room relief if you’re renting out a garage or office for example.
4. No taxable income other than rent-a-room receipts are derived from the rent-a-room letting agreement.

Admin points

1. If a property is jointly owned, then the relief is shared between the two of you, i.e. £3,750 each
2. Providing the criteria are met, then the relief automatically applies. There is no tax return due unless you have other income to report.
3. No expenses can be claimed in conjunction with Rent a Room.
4. It may be better to disregard Rent a Room and claim expenses instead.

Example

Alun lets a spare room in Bethesda via Airbnb. He is a superhost and last year made £12,000 in rental income. He had expenses of £3000

• If he elects to use Rent a Room, his taxable profit will be £4,500 (£12,000 less RaR £7,500)
• If he chooses to claim the actual expenses (the default position) his taxable profit would be £9,000 (£12,000 less £3000).

Therefore, it is beneficial that Alun claims Rent a Room relief.

This is done simply by completing the Rent a Room section of his Self-assessment return.