If you are looking for a no-frills way to make money from property, why don’t you check out the government’s Rent a Room scheme? Don’t waste time, because a big benefit is in store for landlords under this scheme!
Last October, I wrote an article about how you can let extra rooms in your house to students as a means to make money from property. This time I’ll be expanding on the topic and share with all of you the government’s existing program called the Rent a Room scheme.
Gov.uk explains that the Rent a Room scheme helps lessors a tax free additional income of £4,250 per year for simply letting out a furnished room in your home or an entire floor.
Yes, you read that right: the income you earn from renting a room under this scheme will automatically be exempt from tax, provided the amount doesn’t exceed £4,250 annually.
However, if the income you generate exceeds £4,250 annually, you’ll have to file a tax return where you can indicate if you are claiming tax allowance under the Rent a Room scheme.
So who can get in this great gig?
According to Gov.uk, there are 2 qualified groups under the scheme. First are resident landlords- whether or not they own the home they lease. Second are people who are running guest houses or bed breakfasts.
Owners of homes converted into several flats, on the other hand, are not qualified to receive the tax exemption from the program.
The scheme also doesn’t provide for a specific kind of tenant to be let into your home. So whether you are letting property to workers, students, singles, or transients, you can still qualify.
Can you provide other services to your tenant?
Moneyserviceadvice.org.uk explains that landlords can also offer meals and laundry services to their tenants.
The money you receive for these services must be added to the rent you receive to work out your total income, though you have to be mindful to keep the amount below the £4,250 threshold to be for the tax exemption.
How long can the tenant stay in your house?
A period of lease under the Rent a Room scheme lasts like a regular tenancy agreement.
You can make the term periodic – which means the lease of the tenant is indefinite and the contract may end at once. You can also make a fixed term lease, so that the contract has a definite start and end.
Keep in mind that when you and your prospective tenant can’t agree upon the period of the tenancy, it automatically becomes periodic.
Moneyadviseservice.org.uk shares that getting the tax exemption under the Rent a Room scheme is the highlight. But like other laws there a few setbacks for landlords who are operating under this scheme – such as not being able to deduct any expense.
Thus if you spend money repairing wear and tear in the room, you won’t be able to subtract any of that expense against your income if you let out your property under the Rent a Room scheme, according to Moneyadviservice.org.uk.
Personally, I don’t mind being unable to deduct some expenses since the cap for tax exemption is pretty adequate. If you share the same opinion as I, why not go ahead and rent a room in your house today!