If you let out a furnished room in your home, provided it is not an office and you live in the property at the same time that it is let out, Rent a Room relief can be claimed rather than paying tax on the net profit via the UK’s Rent A Room Scheme. Rent a room relief is a fixed figure of up to £7500 per household (£3750 each for a couple) and is deducted from the gross rents received.
Gross rents include any receipts for meals, laundry or other amounts. You cannot deduct any expenses if you claim Rent a Room relief nor can it create a loss. It is simpler than apportioning all the home expenses and is normally more beneficial.
If your gross receipts are less than £7,500 then you would automatically claim the Rent a Room relief. If you receive more than this figure, you have to see if your share of expenses is more than £7500. The expenses which could be claimed are those which relate to the provision of the accommodation.
Example:
David has a lodger who has a couple of rooms in David’s home. The rent and amounts received for meals total £9,500. The share of expenses relating to the provision of the accommodation and meals is £2975.
| David has the choice: | Rent a Room | Profit |
| Receipts | £9500 | £9500 |
| Expenses | Nil | £2975 |
| Rent a Room | £7500 | Nil |
| Net Income | £2000 | £6525 |
Clearly, it is advantageous to claim Rent a Room relief in this instance because the taxable income is £4,525 lower.
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