Rent-a-room relief

Produced by Tolley
Rent-a-room relief

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Rent-a-room relief
  • Conditions
  • Income must be otherwise taxable as trading income or property income
  • Accommodation conditions
  • Meaning of residence
  • Basis of assessment
  • Individual’s limit
  • Gross receipts of up to the individual’s limit
  • Gross receipts of more than the individual’s limit
  • Interaction with PPR relief

Fundamentally, the rent-a-room scheme is a relief which means that the rent received by an individual from a lodger (up to a prescribed limit) can be exempt from income tax. If the gross rents are less than £7,500 (£4,250 for tax years between 1997/98 and 2015/16), the income is ignored for income tax purposes, although this limit will be halved if another person is also entitled to the income. For example, where a couple own the property jointly, the limit is reduced to £3,750 each, even if the income is not split equally.

The rent-a-room scheme is designed to apply where a lodger shares the taxpayer’s own home. It cannot be applied to rooms let as an office or otherwise for business purposes, although this would not prevent the lodger from, say, being a student with an area set aside for study.

To check whether relief is due, see our interactive flowchart. Alternatively, for a static pdf version, see the Flowchart ― rent-a-room relief.

Conditions

Income must be otherwise taxable as trading income or property income

To qualify for rent-a-room relief, the individual must receive rent or payment for goods / services (eg meals, cleaning and laundry) in respect of accommodation. The rent must accrue to the individual during the ‘income period’ (see below). The income must be otherwise chargeable to tax either as trading income or property income (ie the income is not exempt by any other provision).

However, it is unusual for payments from a lodger to be trading income, as services other than the accommodation need to be provided for the rental to be considered a trade. See the Badges of trade guidance note.

It is far more likely that the income would otherwise be taxable as property income if it were not for the rent-a-room scheme.

Accommodation conditions

The accommodation must be:

  1. furnished

  2. a UK residence,and

  3. the individual’s only or main residence for all or part of the income period

ITTOIA 2005, s 786(1)

The accommodation does not need

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