Kirkpatrick & Hopes - Succession Planning Accountants

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Earn £4,250 a year tax free…

Why not let out your spare room?

This scheme is called Rent a Room and it has special rules that apply when you take in a lodger.

Under the scheme, a certain amount of gross income can be received tax-free from letting a room or rooms in the house you live in (that is, before expenses).

This tax-free amount is £4,250 per tax year.

You do not have to take part in the scheme if it is not to your advantage. Instead, you simply declare all your letting income and claim expenses as mentioned earlier.

Do the rules mean I do not have to pay tax on the rent I get?
As long as the total rent you get during the tax year is no more than £4,250, you do not have to pay tax on that income.

If you do not receive a tax return and you receive rent of £4,250 a year or less, you do not need to tell the tax office about this income.

What happens if the rent is more than £4,250?
In this case, you can choose between:

Paying tax on the profit you make from letting the room, worked out in the normal way (see above)

Or

Paying tax on the amount of rent over £4,250

Will I have to pay Capital Gains Tax when I sell my home?
The Rent a Room scheme makes no difference to the Capital Gains Tax rules that apply when you sell your home.

If you have any comments on this post, I’d love to hear from you.

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