Take advantage of the rent a room scheme
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…
10 Minute Read
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 £4,250 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 £4,250 you will be exempt from tax charges on your profit. The tax exemption is automatic, so if your profit does not exceed £4,250, you can sit back and watch the money roll in.
What if my income exceeds £4,250?
If your income from rent a room exceeds £4,250 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 £4,250, Go 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 £4,250 absolutely tax-free. However, there is one downfall. The rent a room scheme does not cover ‘wear and tear.’ By this, we mean any wear and tear 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 wear and tear to outweigh the additional income from rent, but this is certainly a great opportunity to earn some extra cash.
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