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Rent-a-room tax relief for holiday let owners

21st May 2021

Temporarily letting out your property via Airbnb or another booking platform is a great way to earn additional income. But did you know that rent-a-room tax relief means you can enjoy a percentage of this income completely tax free?

What is rent-a-room tax-relief?

Rent-a-room tax relief allows you to earn up to £7,500 per year tax-free from letting out furnished accommodation. This is halved if you share the income with your partner or someone else.

The relief was initially introduced to boost the supply of affordable residential accommodation. But because there is no minimum period of let, it also applies to short-term rentals, such as holiday lets, which many homeowners aren’t aware of.

When can rent-a-room relief be used?

The relief can be used when a furnished room is let to a lodger. It can also be used when the letting amounts to a trade, for example, when someone runs:

  • a guest house
  • a bed and breakfast
  • a short-term holiday let

The tax exemption is automatic if you earn less than £7,500, so you don’t need to do anything.

When can rent-a-room relief not be used?

It’s worth noting that rent-a-room relief is not available if:

  • the accommodation is not your main home
  • if it’s unfurnished
  • if a UK home is let out while the owner is working abroad

You also can’t use the scheme if your home is converted into separate flats. 

Let’s give an example…

Here’s an example of how you could take advantage of rent-a-room tax relief by letting out your home part-time.

George lives in West Wittering. Each summer, he spends two months in Spain to pursue his outdoor hobbies. While he’s away, George rents out his West Wittering home as a short-term holiday let for around £1,000 a week. During his time in Spain, he receives a total income of £8,000.

George is only taxed on £500, the rental income that exceeds the rent-a-room limit of £7,500.

This type of tax relief will be welcomed by many who already rent their home part-time for holiday let purposes. As a property management company, we know that lots of homeowners aren’t aware of this scheme, or at least that it can apply to their situation.

If paying tax on income from letting your property has been a concern, this may be a deciding factor to taking that next step.

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