Rent-a -room relief – are you completing your tax return correctly?
We have refreshed our guidance on the rent-a-room scheme to provide clearer information about how the relief works if you need to file a tax return for any other reason. This update is designed to help you understand how to complete your self assessment tax return correctly.
The rent-a-room scheme allows you to rent out a room (or rooms) in your home and receive up to £7,500 of tax-free income if certain conditions are satisfied. If you receive the income jointly with one or more other person, the limit is reduced to £3,750 per person. You can read more about the conditions for rent-a-room relief on our guidance page.
If the rental income you receive meets the criteria and falls below the current rent-a-room limit, and you do not otherwise need to complete a tax return, you do not normally need to report this income to HMRC – it is automatically exempt. This might be the case, for example, if your only other source of income was from employment, which is taxed under PAYE.
However, if you file a tax return for any other reason, for example you are self-employed, HMRC say you will need to include the rent-a-room claim on your tax return, even if your rental income is below the rent-a-room limit.
We have expanded our guidance on our rent-a-room website page to include details of how to claim the relief on your tax return.
The rent-a-room relief limit of £7,500 has not increased since 2016. It may be the case that you previously received less than the rent-a-room limit each year and it was therefore exempt. However, if the amount of rent-a-room income you receive has increased over time and now is more than the limit, you may need to review your circumstances and check your tax position and reporting requirements.
If you are receiving rental income, you may be impacted by the new Making Tax Digital for Income Tax rules which are due to come into place next April. We will be publishing further guidance on this in due course.
