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Guest Blog: How Govt Rules on Rent a Room Can Work For

By Emma Carvell, PR and accounting administrator, APARI

What is the HS223 Rent a Room Scheme?

The Rent a Room Scheme (also known as Rent a Room Relief) mainly relates to landlords that let rooms in their home – for example, those homeowners who have a lodger, or short-term rental properties, such as Airbnb hosts who rent a room within their house. It allows owner occupiers to receive tax-free rental income if they provide furnished accommodation in their only or main home.

If you earn less than £7,500 then you do not need to declare the income or notify HMRC. However, if you earn over this threshold, you will need to declare the income and expenditure through a Self-Assessment tax return.

When completing your Self-Assessment tax return there are a couple of options to choose from. You can claim the gross income up to £7,500 through the Rent a Room Scheme and pay tax on any income over this amount. To do this, you will need to ‘opt-in’ to the Rent a Room scheme with HMRC. Alternatively, you can choose ‘not to opt-in’ to the scheme and simply include your income and expenses on the property pages of your Self-Assessment tax return.

You can choose to opt out of the Rent a Room Scheme by notifying HMRC by 31 January after the end of the tax year in question. It’s also worth noting that if another person receives rental income from the same property, then the allowance is reduced to £3,750. This includes joint ownership. This reduction in the allowance may mean that it would be more beneficial for you to claim income and expenses on your tax return.

Who qualifies for the Rent a Room Scheme?

You can opt into the scheme at any time if you’re a resident landlord, whether or not you own your home, or if you run a bed and breakfast or a guest house. However, you cannot use the scheme for homes that have been converted into separate flats – they must still be a part of the main property.

You are not eligible to use the scheme if: the rooms let are unfurnished; you have let out your home whilst living abroad; it’s not your main residence; and if the space is let as an office for business. The space must be used to “live in” but those renting the room can work from home during “out of hours” (in the evenings or on weekends). It can also be let to students.