Earn money from your property
The Rent a Room scheme is an optional scheme open to owner occupiers or tenants who let out furnished accommodation to a lodger in their main home. Not opt into it — in which case you simply record your income and any associated expenses on the property pages of your tax return.
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If you earn more than the threshold or already complete a tax return you simply declare the relevant lettings income and expenses when completing your tax return. The rent-a-room scheme and benefits The rent a room scheme can be a great way to supplement your income and provide accommodation for lodgers. However, the income you get could affect some means-tested benefits.
Renting out a room in your home
Housing Benefit and the rent-a-room scheme How rent-a-room affects your Housing Benefit depends on how the how in a private house you can earn renting the room is classified.
Boarders: If, along with the room, you are providing prepared food, the renter is classified as a boarder. Sub-tenants: If you are only providing a room and no meals, the lodger is called a sub-tenant. This means it is a great way to supplement your income.
However, if you are renting robot option a spare room you will be subject to the bedroom tax. You can find more information about lodgers and their impact on your benefit claims on the Citizens Advice website.
Other means-tested benefits and the rent-a-room scheme If you are getting other means-tested benefits such as Income Support or Pension Credit, any income you get from renting out your room could affect these benefits. Providing meals and services You might wish to charge for additional services when you take in a lodger, such as providing meals or laundry services.
The money you receive for these services must be added to the rent you receive to work out your total income. This is the normal arrangement for a rental business.
Pay tax on the gross before tax income minus the tax-free threshold, but with no allowance for expenses. The simplest way to work out what to do is to calculate what your expenses are.
You would be living alone unless you rented out a room in your home. An inspector will check that the accommodation meets the minimum physical standards for rental accommodation. You have up to 5 months to produce a tax clearance certificate to the local authority. Your rights and obligations Self-contained units If you rent out a self-contained unit in your home, such as a converted garage attached to your home or a basement flat, the rights and obligations under residential tenancies legislation apply to you.
If they are smaller than the threshold, then go with option two. Running a business If you run a guest house, bed and breakfast or provide services such as catering and cleaning as part of a letting business, you can still take part in the Rent a Room scheme.
However, this advantage might be outweighed for some people by the fact you cannot claim any expenses related to the letting.
Rent a Room scheme – how it works and tax rules
However, he could opt out of the scheme and treat his income as a normal rental income. This means he can deduct expenses and only his final profit is taxed.
In this example Frank is better off in the Rent a Room scheme. Even though you cannot claim expenses with the Rent a Room scheme, you might need those records should you opt out later on.
Before you take a lodger in There are a number of checks you need to perform before taking in a lodger. Speak to your lender, insurer or landlord to ensure you can take part in the scheme.
Other ways to boost your income The Rent a Room scheme is just one way you can bring some money in. Learn how to deal with Living on a low income. Did you find this guide helpful?
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