Budget 2013 - what can we expect?
The Chancellor will deliver this year’s Budget speech on 20 March. Many changes are now announced and consulted on in advance, so fewer rabbits are pulled from hats on the day! But one or two surprises might come from HM Treasury’s recent (and last-minute) call for Budget ‘representations’, to which LITRG submitted a longstanding recommendation – an increase to the rent-a-room relief limit.
Whilst we welcome the chance to contribute to tax policy development, afforded by HM Treasury’s call for Budget ‘representations’, our response stressed the need for significant changes to be consulted upon thoroughly in advance, to prevent the implementation of poorly-considered legislation.
Nevertheless, we have taken the opportunity to draw attention to the outdated income limit for 'rent-a-room' relief, now in desperate need of review.
Rent-a-room relief allows a person to receive tax-free income from letting out a room in their own home up to a limit which has now been fixed for some 15 years at £4,250 per annum. Conversely, the national average weekly rent in England for private rents has increased by 66.3% over the past eight years. Assuming a similar rate of increase over the full 15-year period, had rent-a-room relief been indexed at the same rate, it would now stand in excess of £10,000.
The relief, in its current form, is often useful for low-income taxpayers – for example those who are struggling to live alone and make ends meet, and therefore take in a lodger. An increase in the rent-a-room limit would avoid tax implications for many who let out rooms and could also increase the availability of much-needed affordable housing. HMRC’s self-assessment process would benefit from the removal of those taxpayers who complete tax returns for the sole reason of declaring rental income above the current exempt limit.
We have therefore recommended a one-off increase in the limit now, to £10,000 per annum, and up-rating the limit year on year thereafter.
Follow the link below to read the full LITRG response.
Contact: Robin Williamson (please use form at http://www.litrg.org.uk/ContactUs)