How the Rent a Room Scheme works

The Rent a Room Scheme lets you earn up £7,500 per year tax-free from letting out a part of your own home.

You don’t need to submit a self assessment tax return if your rental income is under this limit.

Am I eligible?

Yes, if:

you’re a “resident landlord” – this means that you also live there (doesn’t matter if you own it or not)
the room is furnished
or you run a bed and breakfast or a guest house.

What if I share a jointly owned property with my spouse?

Simple:

each gets half of the Rent a Room allowance: £3,750
but that’s ok: each of you pays tax on half the income from rent anyway.

What if I rent out a room through Airbnb?

Yes – as long as you live there (at least most of the time), then you can use this allowance for Airbnb as well.

What if my rental income is less than the Rent-a-Room limit?

In this case that income it’s tax-free – automatically.

You don’t need to do anything.

What if I earn more than the limit?

HMRC lets you choose between:

Method A: you pay tax on the actual profit – rent minus expenses and capital allowances
Method B: you pay tax on what you earn over the Rent-a-Room limit.

In both cases you’ll need to submit a self assessment tax return.

What you should know:

HMRC will automatically use Method A
if you want to use Method B, you need to tell HMRC
you can switch from year to year
if you use Method B, you cannot deduct any expenses or capital allowances
if you use Method B, it automatically stops if your rental income drops below the Rent-a-Room limit.

What if I made a loss this year?

You normally can’t claim a loss if you use the Rent a Room scheme.

However, there is a workaround:

this year tell HMRC that you want to pay tax using Method A
next year switch to the Rent a Room scheme
then you can use the loss from this year to reduce your tax on what you earn over the £7,500 threshold.

What if I have more tenants?

Your property may be considered a House in Multiple Occupation (HMO) if you let rooms to more than 2 people:

extra safety requirements
extra standards
you’ll often need a licence.

How TaxScouts works

1. Simple online tax assessment

Our online tax-bot will go over your tax situation and will make sure you won’t overpay your taxes.

2. Chat to human advisors

You can talk to one of our tax assistants at any time during the process when you have any questions.

3. We’ll sort your documents online

We’ll tell you exactly what documents you need and sort them for you online. You just upload them or snap a picture with your phone.

4. Everything gets prepared for you

Your certified accountant will go over your details & prepare your tax return for you to review. It will be filed on your behalf once you approve it.

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