When you let rooms in your own home as residential accommodation, you can receive the rent tax-free if it falls within the limits for rent-a-room relief. This relief is currently capped at rents of £7,500 per year. Where more than one person receives the rent from the property, each person has a tax-free exemption for rent of £3,750.
The conditions include that you must occupy the property as your main home at some point in the tax year. This relief can’t cover income from a holiday home or buy- to-let property. Also, the accommodation must be used for residential purposes, not as an office or storeroom.
If you let out land or buildings which don’t qualify for rent-a-room relief, the income could be covered by the £1,000 property income allowance. You can’t use this allowance against rent paid by your own company, a company you work for, or one with which your spouse is associated.
If either type of rental income exceeds the relevant allowance, it must be declared on your tax return, along with any related expenses. If the allowance exceeds the actual expenses, you can deduct that allowance in place of those expenses.
Can you claim rent-a-room relief or the property allowance?