Rent a Room Scheme
“If you already have a lodger or are thinking about letting furnished rooms in your home, you can receive up to £4,250 a year tax-free (£2,125 if letting jointly). This is known as the Rent a Room scheme”, according to Directgov.co.uk website.
Under the rent a room scheme, live-in landlords can claim £4,250 rent a year tax free (£2,125 if letting jointly). This is all due to a scheme called “Rent a Room” designed to encourage people to take in lodgers:
You can take advantage of this scheme if you let out a room or part of your main property (it can be a whole floor but not a self-contained flat) to a lodger. A lodger is someone who pays to live in your home, sometimes with meals provided, and who often shares the facilities.
You can choose to take advantage of the “Rent a Room scheme”, regardless of whether you are a home owner or renting your home. However, if you are renting, you should check whether you are allows to take in a lodger or not.
Of course there are advantages and disadvantages of the scheme. Indeed according to Directgov.co.uk the principal point to bear in mind is “that if you are in the Rent a Room scheme you can’t claim any expenses relating to the letting (for example, wear and tear, insurance, repairs, heating and lighting)”. Moreover to find out whether you will be “winning” joining the scheme or declaring all of your letting income and claiming expenses on your tax return you need to compare the following:
· How much income you are left with after your expenses
· The amount of your receipts (rent plus any income from laundry services, meals, etc) over £4,250 or £2,125 if letting jointly (2010-11 tax year).
On the other side, the main disadvantage is that you will have to share your house with someone who is not always related to you or your family as well as a restriction of your private life.
However, Judy Niner, founder of website MondaytoFriday.com, which brings landlords and lodgers together, says that while she thinks it would be great if there were an increase in the tax-free threshold, it is unlikely to happen soon. “This is still a good tax break and without it there would not be as many rooms rented out during the week, and this would really impact on the mobility of many UK workers,” she says.
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