Did you know that you can receive up to £7,500 of rental income from a furnished room in your main residence tax free?
The relief was originally introduced in 1992 with a limit of only £3,250 but this was subsequently increased to the current limit of £7,500 from 6 April 2016.
The only conditions are that the property must have been your main residence at some point in the tax year.
The tax exemption is automatic if you earn less than £7,500 from your property. This means that you don’t need to declare the income.
If you earn more than the £7,500 threshold then you will need to complete a self-assessment tax return. You can then choose to opt into the rent a room scheme and to claim your tax free allowance, or alternatively, you can choose not to opt into the scheme and to record your income and actual expenses instead.
The increase in the popularity of Air BnB has led the Government to the conclusion that this relief is being used more and more for holiday rentals, which was not the intent. As a result, it is likely that an additional test will be included in the foreseeable future to ensure that the relief is only available if the owner is present in the property at some time during the rental. Watch this space for further details.
For more information please contact Lesley Sutton on 01484 550037 or email firstname.lastname@example.org