If an owner-occupier or tenant has a lodger, up to £4250 could be received tax free. The Rent a Room scheme enables anyone who is renting out a room that is furnished and in their main residence to earn £4,250 tax free during the year. Other income isn’t taken into account for the purposes of the scheme.
The tax free amount applies to gross receipts from the renting out of a room in your home, which is the amount before any expenses are deducted. A lodger will pay to rent a room in a person’s main or family home, sometimes receiving meals and sharing family rooms. If the house has been converted into flats, the scheme is not applicable. However, the scheme does apply if you let out a furnished room or a whole floor of your home to a lodger, providing it is furnished.
If a person is letting out furnished accommodation jointly with someone else, £2,125 will be allowed tax free for each person. If the rent received is more than £4,250, or other services like cleaning or meals are charged for and the total amount is more than £4,250, a self-assessment tax return must be completed.
It is important to work out whether it is beneficial to join the Rent a Room scheme, or complete a tax return providing details of rental income and expenses. This is dependent on receipts that include rent and other services, and the amount of expenses incurred.
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