Live-in landlords can collect up to £4,250 in rent tax free a year from someone who shares their home.
The rent-a-room scheme was originally introduced to ease a shortage of accommodation in the last housing crisis, but it’s still on the tax law books and is finding a new lease of life with singles that need to find somewhere to live.
The rules apply to anyone – so a home sharer can be a student as well as a lodger.
Rent-a-room is particularly attractive in the big towns and cities where splitting the costs of renting a two bedroom flat is a lot more expensive than renting a room.
The result is the same as in both cases; the landlord has to let his house sharer use other rooms and facilities in the property as part of the deal.
Landlords can be homeowners or tenants – as long as they have the permission of their landlord to sub-let.
Providing the rent collected in any one tax year does not come to more than £4,250 – the equivalent of £81 a week – the landlord does not have tell the tax man or pay any income tax on the money received.
It’s sensible to keep some records just in case the taxman comes snooping in future years.
Rent-a-room must meet some basic rules:
1. You must live in the property where you are letting the room
2. The room must be furnished
3. The room cannot be a self-contained flat
4. The lodger has to share other rooms in the house as well, like the bathroom, kitchen, and living room.
It’s OK to take in two lodgers, providing the rent-a-room total rent does not exceed £4,250 combined.
If the rent exceeds £4,250, the letting becomes a rental business that requires proper accounts and informing the taxman about extra income.