Changes to Rent a Room relief

It was announced at the Summer Budget 2015 that the Rent a Room relief limit has increased from £4,250 to £7,500 per year, which came into effect from 6 April 2016.

Rent a Room relief is available for individuals that rent out a room, or rooms, in their main residential property. The relief will also apply to an individual who rents out a room in a guest house, bed and breakfast or similar, provided that it is also their main residence.  The result of the relief is that up to £7,500 of rental income may be received without incurring a UK tax liability.

If the rental income is below the £7,500 threshold then the relief is automatic and no election needs to be made. However, if the rental income received is higher than the threshold the individual would need to complete a tax return and claim the relief.

It is important to note that if the relief is used then no further expenses can be taken into account when calculating the taxable income. However an individual with rental income above the threshold may choose to not claim the relief and instead calculate their taxable rental income based on the income received and allowable expenses.

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