Do you have a spare room? We are delighted to see that we are not the only ones who believe in renting your spare room. The UK government have decided to encourage the country to rent their spare room through their new Rent a Room Scheme which lets you earn up to a threshold of £4,250 per year tax-free from letting out furnished accommodation in your home. Meaning a taxpayer can benefit when they take in a lodger (or in our hosts case a student from us) and not face taxes on the extra income!
How it works
Gov.uk explains how it all work ‘The tax exemption is automatic if you earn less than the threshold. This means you don’t need to do anything. If you are earing above the £4,250 threshold you must complete a tax return. Anyone can opt into the scheme, and at any time – if you are a resident landlord (whether or not you own your home), you run a bed and breakfast or a guest house’. As many of our families opt to offer Bed and Breakfast, half board or full board the money you receive for these services must be added to the rent you receive to work out your total income.
Money Advice offer some tips when opting into the scheme, ‘It’s important to keep records of your income and expenses. Even though you cannot claim expenses with the Rent a Room scheme, you may need those records should you opt out later on.’ But overall ‘if you’re looking for ways to improve your bank balance, one option is to rent out your spare room. By signing up to the Rent a Room scheme, not only do you enjoy the extra income from the rent, but also up to £4,250 a year is free from tax.’.
With the threshold planning to rise to £7,500 by April 2016 this is clearly something the government is supporting and encouraging.
We keep close to the detail so you don’t have to! Any questions about paying your taxes please don’t hesitate to give us a call or email.
Read the full articles below: