Making the most of your home in the bad times
is a government initiative where home-owners can rent out a spare room (or even a floor of their house) and receive up to £4,250 a year tax-free (or £2,150 if letting jointly).
How the scheme works:
• This scheme is on offer if you decide to let a furnished room in your main home
• The lodger can occupy a single room or an entire floor of your home
• You can take advantage of this scheme even if you are renting the property – however, check with your lease to make sure you’re allowed to take a lodger
• If you’re a home-owner, double check with your mortgage and insurance terms and conditions to see if you’re able to take on a lodger
Advantages & Disadvantages:
• Rent a room scheme can apply to businesses such as bed & breakfasts, guest houses, catering and cleaning services used as part of a letting business
• If you charge for additional services (e.g. laundry services, meals etc) then these expenses will need to be added to your receipts and if these come over the £4,250 allowance, you’ll be required to pay tax
• If you share a home and are both renting rooms, you will each be entitled to half of the allowance (up to £2,125 per tax year) before you are required to pay tax
• If you use the Rent a Room scheme, you’ll not be allowed to claim any expenses relating the letting (e.g. wear and tear, repairs, heating, lighting etc)
How to opt in or out of the scheme:
• If you want to opt in and don’t normally receive a tax return and your receipts are below the tax-free thresholds for the scheme, the tax exemption is automatic so you don’t need to do anything
• If you wish to opt in and your receipts are above the tax-free threshold, you must tell your Tax Office - you can do this by completing a tax return and claiming the allowance
• If you want to opt out, complete a tax return within the usual deadline and declare the relevant lettings income and expenses on the property pages
For more details see www.directgov.co.uk or view the video at: http://www.directgov.coionline.tv/index.php?vid=rentaroomfilm
Have you made use of this scheme? Tell us your experiences.
This entry was posted on Thursday, August 14th, 2008 at 12:16 pm and is filed under Finance, General Interest. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
I think that this is a good incentive to rent out a room in your own home, helping students and those looking for temporary accomodation as well as having extra money on the side at the end of each month? It’s a shame that some of that money can’t go towards any repair jobs if its needed…