Rent a Room Scheme: What is it and How Much Could You Make?
BY READERS DIGEST
1st Jan 2015 Insurance & Legal
If you are struggling financially and looking for a way to make a bit of extra cash without having to do too much, the Rent a Room scheme is a great initiative which will allow you to make some extra money by renting out a room in your home to a lodger.
Some of the great things about this scheme include the fact that you are able to take part in the Rent a Room scheme even if you are not a homeowner, and can make a large sum of money before you have to pay tax on the income. Here are some more facts about the Rent a Room scheme.
You can rent as a tenant or owner
Many homeowners already rent out a room in their home to a lodger, but it is more rare for a tenant to do this. This scheme allows tenants to rent out a room in their home as well as homeowners, as long as the lease on the property allows the tenant to do this. You can ask your landlord for confirmation as to whether or not you are allowed to sublet your property before you take up a lodger.
You can make an extra income
You can make quite a lot of money annually through the Rent a Room scheme, but one of the best things about this is that you can earn up to £4,250 before tax. If you don’t take in more than £4,250 from your lodger then you won’t have to pay any tax on this extra income at all, and if you do then you will just need to fill out a tax return each year to ensure that you are paying the right amount of tax for the money that you earn.
You can take part as a business
If you are running a guest house, bed & breakfast or another business where people are lodging in your property, you can still take part in the Rent a Room scheme. You will still be exempt from tax on your profits up to £4,250, or £2,125 if you are letting the property jointly. You may need to research more about filling out your tax return if you are a business interested in taking part in the scheme.
If you decide that the Rent a Room scheme is something that will help you to make a little additional income, and that this is something which will be good for you, then you can opt in by contacting HM Revenue & Customs and filling out your tax return so that you will receive the tax-free allowance. You must remember to keep records of all of your income and expenditure when you are taking part in the scheme so that you can prove what you have earned and to make it easier for you to fill out your tax return at the end of the year.
