If you rent your home via platforms, such as Airbnb, be aware that draft legislation could affect your eligibility for the Rent-a-Room Scheme from April 2019.
What is the Rent-a-Room Scheme?
The Rent-a-Room Scheme was introduced in 1992 and was designed to encourage individuals to make spare capacity in their homes available for rent.
It allows owner-occupiers and tenants tax-free rental income of their homes of up to £7,500 (or £3,750, if someone else, such as a joint owner, receives income from renting out a room in the same property). The relief applies automatically and does not have to be reclaimed. However, if your gross receipts from renting out a room exceed £7,500 there are two possible ways of being taxed – either on your actual profit or on your gross receipts over £7,500 (or £3,750).
Who is eligible?
If you rent out a furnished room to a lodger in your home or if you run a guest-house or bed and breakfast business you could be eligible for Rent-a-Room Relief. The accommodation must be part of your main home, furnished and you must be living in it for part of the year. You will not be eligible if you are renting out your home whilst living abroad.
Impact of draft legislation
Draft legislation in the forthcoming Finance Bill adds a new condition effective April 2019, where the landlord must be in the home at the same time as the tenant for at least part of the time of the rental period. The aim of this new clause is to ensure that the Rent-a-Room Scheme continues to be targeted at incentivising individuals to use their spare accommodation by sharing their homes.
If you would like to discuss the Rent-a-Room Scheme or other property tax issues, please do get in touch with our tax specialists at DRG Chartered Accountants.
For further information
HMRC Guidance Rent-a-Room Scheme (2018)
Finance Bill Clause 14
