New rules on rent-a-room

What is rent a room?

Rent a room relief (RARR) allows anyone who lets all or part of their home, say to a lodger, ro receive tax free the lesser of £7,500, or £3,750 for each joint owner of the property, per year. The exemption applies to rents and related payments, e.g. money for laundry services. HMRC now want to put further restrictions on RARR.

So what’s changing?

On 6 July 2018, the government published a policy paper Income tax rent a room relief and draft legislationdestined for Finance Bill 2018-19 and then for Finance Act 2019.

RARR is increasingly being claimed by people who let tier homes while temporarily absent from them, for example, where a property is near to a major sporting venue/event, etc such as Wimbledon, or where an individual has to temporarily live elsewhere. It was really aimed at people who took in lodgers.

From April 2019 the RARR rules will change so that it can only be claimed in respect of periods where occupation of the property as ‘sleeping accommodation’ overlaps ‘wholly or partly’ with the period of letting. This means it will still be available to Airbnb type of lettings as long as they occupy part of your home for some or all of the time that you’re letting another part of your home.

The £1,00 tax free property allowance will be available instead.