The artful lodger
Rent-a-room relief has been around for years – if you receive rent of up to £4,250 a year for letting a room in your only or main residence, you don’t have to pay tax on it. Whether this increases the availability of accommodation is open to debate – probably the best result is that it allows what many people did anyway (taking money from a lodger without declaring it).
There are limits, though. It is supposed to be a room in the house you live in – you can’t extend it to a buy-to-let investment property. In a recent case, a woman who owned four properties omitted the rent from one of them from her tax returns. The Tribunal agreed with the taxman that she probably didn’t live there – after all, her husband and two children lived in one of her other addresses, and this was a small terraced house with a tenant. She had to pay the tax and a penalty.
If you aren’t sure what income is taxable and what you can leave out, we can advise you.