From 6th April 2019, new legislation, and not necessarily for the better, will come into effect.
It will mean that you won’t be entitled to rent a room relief unless you are living in your home for some or all of the time that you let your rooms to lodgers.
Current Situation
The current situation is that any property owner who lets all or part of their homes to lodgers receives rent a room relief. This is in the form of tax free income, the lesser of £7,500 or £3,750 per year. So, for a property owned jointly, each owner would be allowed to earn £3,750 tax free.
However, this current legislation is going to change. To help with domestic finances, there has been an increase in people letting out rooms. This is either from people working away from home and supplementing their income or short term cash benefits from sporting events. In July 2018, HMRC proposed new legislation with the aim of preventing this from happening in the future.
Changes to Rent a Room Relief
From 6 April 2019, as a property owner, in order to claim rent a room relief, you will have to live in your home for at least one day during the period when you have tenants. If you rent out your rooms or home on an Airbnb basis, rent a room relief is still available as long as you live in your home for at least one day during every period of letting. The legislation is slightly woolly. It refers to wholly or partly so that would suggest a minimum of one day.
Whilst not as generous, there is some good news. When rent a room relief doesn’t apply, you will be able to claim £1,000 tax free property allowance.
It is worth considering how these new rules may affect you. If there are any significant changes to the final proposed version of the legislation when the Finance Bill 2019 is published in December 2018, we will update you with a new blog.
Action
If you are interested in receiving further information or booking a strategic consultation with Iain to see where he can help you legally avoid tax, please contact Jacqueline on telephone 0191 603 0270 or email admin@iainwallis.com
