If you have a spare room in our home, have you ever thought about renting it out? The government’s Rent a Room scheme is a great way to earn a little extra cash and improve your bank balance, and today, we’re going to outline everything you need to know. Let’s get stuck into the Rent a Room scheme and find out what it is, how it can benefit you, and everything else you need to understand.
What is it?
The Rent a Room Scheme is open to anyone wanting to rent out a room with furnished accommodation to a lodger in their primary residence. The scheme is eligible for homeowners and tenants alike. You can earn a tax-free amount of rental income of up to £7,500 per year, after which you will be taxed on any profits.
How does it work?
OK, so let’s drill down into the basics of the Rent a Room Scheme. The scheme is open to anyone who lets a furnished room to a lodger – including if you run your letting as an actual trade, such as a bed and breakfast. However, you can’t use the scheme if the room in question is not part of your primary home when you let it, or is unfurnished, or is used as an office or business unless the lodger only works in the evenings or weekends. It is also allowed if your lodger is a student and you give them study facilities. Finally, you can’t use the scheme if you live abroad while letting your room – you must be in the UK.
How does it benefit you?
The most eye-catching fact about the Rent a Room Scheme is that it allows you to earn up to £7,500, completely tax-free. In fact, if you earn under the threshold from your rental income, you don’t even have to declare it to HMRC, as you are automatically exempt from tax. However, you can’t claim for any expenses related to the letting so you will have to fork out for repairs, wear and tear, or any other expense involved with letting out a room.
What do you need to do?
If you are interested in letting out a room, there are a few things you should do first. Check your mortgage lender to find out if you are allowed to have a lodger under the terms and conditions of your loan. You will also need to check with your home insurer – again, it may not be allowed under your contract. If you are renting and wish to take part in the scheme, it’s important that you have a lease where subletting is allowed. Finally, don’t forget to keep accurate records of your expenses and income.
If you think the Rent a Room Scheme could bring you a valuable additional income, why not get in touch with us today? Prestige can take you through all your options and help you work out whether it will be worth it. Call us for an informal chat or to arrange an appointment.