Rent a room relief to be ‘Clarified’

17th August 2018

The Treasury has announced it will introduce new rules to “clarify” rent a room relief, from April 2019, in light of an increasing number of people making the most of online portals like Airbnb to rent out their homes.

Homeowners can currently earn up to £7,500 per year tax free by renting a room to lodgers under the “rent a room relief”, but many have also used the relief as an umbrella to earn tax free rental income by letting their entire house for short periods. Houses in sought after locations near major events and attractions or within easy commute of City centres can fetch ‘holiday rental’ market prices when let on a short-term basis. Many owners have become canny at heading off on holiday at prime times and renting their house out in their absence.

The new rules being introduced will mean the tax break is only available if it is part of a property being rented out – i.e. not the whole home – and if the owner is present for at least some of the guest’s stay. The aim of the clarification being to make it a truly ‘room’ based relief.

Those with a portfolio of properties that have switched from seeking long term rentals to more profitable short term premium rate lets, will be hit hard by the changes. A new £1,000 trading and property allowance will apply to earnings from the whole property, but this is a token gesture and will be of little solace to those that have previously utilised the full £7,500 of relief.

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