Taking a lodger? Don’t forget to claim “rent a room” relief

HMRC are carrying out a review of rent a room relief to discover whether the scheme, introduced back in 1992 provides the right incentives for the rental market. The current scheme exempts from tax, gross rents up to £7,500 where rooms within the taxpayer’s main residence are rented out.

Most accountants that responded to the call for evidence were keen for the relief to continue as it encourages taxpayers to let out spare rooms and provides them with additional income.

Note that where the gross rental income exceeds £7,500, say £12,000, the excess of £4,500 would be taxable. Alternatively the taxpayer may deduct costs of providing the living accommodation such as a proportion of mortgage interest and light and heat. If these allowable expenses amounted to £9,000 then it would be more appropriate to be taxed on the net rental profit of £3,000.

Note also that the current scheme only provides relief where the rooms let are in the taxpayer’s main residence and if the property is jointly owned, the relief would be £3,750 each. Where the lettings are in another property, the new £1,000 property allowance could be set against the gross rental income, however this allowance applies to each taxpayer.


How to change the direction of your business (and stay profitable)

Changing the direction of your existing business is challenging, hard and time-consuming work – and certainly not an enterprise for the faint hearted! But, on the flipside, when a chance is carried out well it can also be a highly rewarding and profitable move for you and your business.

How, then, do you decide if a change of business direction is right for you? And how do you ensure that this change process is effective and meets your newly conceived vision for the business?

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