Best Buy Mortgages Glossary - Rent-a-Room Scheme
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Rent-a-Room Scheme
If you own your own home or if you're a tenant for that matter,
you are permitted to let furnished rooms in your home and
receive income which will not be taxed. It's called the 'Rent a
Room' scheme. Since the 1997/98 tax year you have been able to
earn up to £4250 rental income per annum tax-free, or £2125 per
person if the room is let jointly by a married couple.
Rent includes payments for meals, cleaning and laundry as well
as the accommodation itself. Amounts you charge to cover council
tax, telephone and heat & light are not necessarily allowable
for tax relief. To qualify under the scheme, you must live in
the property with the tenant for at least part of the time, and
it must be your principle place of residence - in other words
your main home.
If the gross rent received is greater than the annual allowance,
you may choose to pay tax either on the excess or on the gross
rent less expenses such as management costs and maintenance (but
not home improvements). Where the gross rent is not much over
the allowance, the first option is usually cheaper.
Further information on the Rent-a-room Scheme can be found in
the Inland Revenue's leaflet IR87 Letting & Your Home and on the
Tax Help sheet IR223.
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