If money is a little tight at the moment, you’re not alone. But that doesn’t make it any less troubling.
When you’re struggling to make ends meet, you’ll understandably have the worries of the world on your shoulders. But there’s some good news, and it comes in the form of something called the ‘Rent a Room’ scheme.
It’s all about renting a spare room within your property and it has some compelling tax benefits.
But, hang on – I’m worried about my stuff
If you’re worried that renting a room out might endanger your possessions due to a poor tenant, Rent a Room gives you plenty of support and cover to minimise the risk.
However, you would also be advised to take out some basic specialist insurance, just in case anything is damaged, either deliberately or accidentally.
So, let’s get that worry out of the way and think about how Rent a Room could actually save and earn you some money.
Backed by the government – and tax efficient
The Rent a Room scheme is backed by the UK government and allows home owners to receive tax-free rental income by providing furnished accommodation to a tenant.
The annual Rent a Room limit sits at £7,500 – any amount of rent earned up to and including this amount is completely exempt from tax. Nice, right?
This amount does reduce to £3,750 if there’s a joint owner who is also receiving income from letting accommodation at the same property (i.e. another room), but it’s still tax free and definitely worth grabbing if you can.
How do I know if I can use the scheme?
If you have a furnished spare room within your own home that’s available for someone to use, you can take advantage of the tax-free Rent a Room scheme – it’s that simple.
It applies if:
- you’re letting the room out to a lodger;
- you’re running a guest house;
- you’re running a B&B; or
- you provide services such as cleaning and meals.
It doesn’t apply if the room isn’t furnished or is used as an office. And the same goes if you want to let your UK home while you’re living abroad.
What to consider before becoming a landlord
Becoming a landlord isn’t a small thing. Remember: you’re letting your home out essentially to a stranger (usually), and that means there are a few things you need to get straight in your mind before doing so.
Start by understanding that being a landlord is a business. Under the Rent a Room scheme, you’ll make decent profit if your income sits within the £7,500 limit, but just keep in mind that there may be other expenses to consider from time to time.
You’ll also have a duty to keep the property in a habitable state, and to ensure that ‘furnished’ really does mean ‘furnished’. If anything within the room requires replacement, that’ll be your responsibility.
Lastly, it’s also important to check if you’re actually allowed to let out the property, as some mortgage providers may not allow you to do so. Double check with local authorities and take a look at your mortgage and deeds to ensure renting is definitely an option.
If you’re satisfied you want to become a landlord and benefit from the Rent a Room scheme, this is a great way to make ends meet in difficult times.
Backed by the government and tax free up to £7,500, it really is a great option for earning some serious extra cash.