Rent-a-room relief to be modified

The publication of the draft Finance Bill 2018-19 includes legislation to change the way the rent-a-room relief scheme works. Following last year’s Budget, a consultation was launched by HM Treasury to examine the design of the rent-a-room scheme.

When the relief was first launched it was intended to be used where one bedroom in a house was rented out to a lodger for medium to long-term lets, however this has changed as more and more people rent out rooms online for short term lets using property portals and apps (such as AirBnB).

The new legislation will introduce a new test that must be satisfied in order to be eligible for the relief. The test requires that the individual or individuals in receipt of rental income, need to share occupancy of the residence for all, or part of the period, of occupation which gives rise to the receipts. This change will mean that the relief will not be available if the owner is absent for the whole period that they sub-let rooms.

If an individual lets their house and is away for only part of the rental period, then the rental would be eligible for rent-a-room relief. The initial consultation also suggested the removal of relief for rentals of less than 30 days. However, this measure has not been included in the new legislation. The changes are expected to come into force from April 2019.

Posted in Income Tax

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