Now a less spectacular relief but well worth having is what’s known as rent-a-room relief.
If you decide to let a room in your main residence, you can receive a rental income of up to £4,250 a year and have no tax liability.
In order to claim this allowance, the property must satisfy the following conditions:
a) you must also live in the property;
b) the room you are letting out must be fully furnished; and
c) it must not be a self-contained flat.
If you claim the rent-a-room relief, then it is not possible to claim any expenditure that you have incurred with regards to the letting.
This is a very common strategy for those people who have houses that are too large for their needs. For example, if your children have left home, then you may decide to rent a room they lived in for an additional tax-free income.
However, it is not always a good idea to claim this relief because you need to do the sums and check whether you have actually made a loss on the letting.
If you have actually made a loss then obviously you would rather claim that loss against possible future letting income than take advantage of the exemption.
Nevertheless, in most cases where you have let a room in your house to somebody then £4,250 is going to be a valuable exemption to claim.
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