At times we rent a room in our home to lodgers so as to be able to get extra income from the use of an empty room.

Usually, when you earn rental income in the UK, it is a taxable income.

The taxpayer would have to declare this to the HMRC through the self-assessment regime.

But if you sublet a room to a lodger and you meet certain conditions, you will not need to make this declaration.

The reason is that you automatically qualify for a rent a room relief.

WHAT IS A RENT-A-ROOM TAX RELIEF?

This tax relief is given to taxpayers that rent a room in their house and meet certain conditions.

Conditions to be met to qualify for rent a room relief:

• To qualify for this relief the amount received in a tax year must not be more than £7,500.
• The amount received from renting out this room must relate to only one house
• The house must be a furnished house and the rental income relates to letting out a room or providing other services to your lodgers such as providing food or cleaning
• You must be living in the house that you are letting out to a lodger

When this relief is claimed, expenses incurred in letting this room are not deductible.

What happens when you would rather prefer to declare the income earned and also claim associated expenses?

You are allowed to opt out of the by submitting a self-assessment return.

WHAT HAPPENS WHEN YOUR RENTAL INCOME IS MORE THAN £7,500?

When you receive more than £7500 in a tax year, it automatically disqualifies you from claiming rent a room relief.

However, you are allowed to declare all the income that you have earned and then deduct £7500 as your expenses.

This is referred to as an alternative basis.

When you use the alternative basis, you’re not allowed to deduct additional expenses after applying the £7500.

To apply this alternative basis, when you are submitting your self-assessment, you should tick the relevant box for you to be able to enjoy this tax relief.

DO YOU RECEIVE DOUBLE RENT A ROOM RELIEF BECAUSE OF YOUR SPOUSE?

When you live with a spouse, you are not allowed to claim separate rent a room relief for the same property.

The tax relief will be shared equally among the two, making £3750 per person.

Conclusion.

Thanks for reading my blog post.

If you receive rental income from your lodger, you are only expected to report to HMRC if the total gross received is more than £7500.

If you would like me to support you with tax advisory issues, kindly contact me.