How does rent-aroom tax re­lief work?

The Daily Telegraph - Your Money - - YOUR MONEY -

I want to build three sep­a­rate rooms in my house with their own en­trances and rent them out to three in­di­vid­u­als. These rooms will also have their own kitchen and lava­tory. I’ll be liv­ing in my own part of the house. Am I able to claim the rent-a-room re­lief? MA, VIA EMAIL

From the situation you de­scribe, it doesn’t sound like you can.

The scheme ap­plies only to land­lords who let a fur­nished room to a lodger in their own home, or to those who run a guest­house or bed and break­fast. Short term let­tings, such as those found on Airbnb, are cov­ered. The first £7,500 earned from let­ting out rooms in these cases is tax-free.

But it sounds as if you plan to cre­ate sep­a­rate res­i­dences, which are not el­i­gi­ble.

There is an ex­cep­tion if you let fur­nished ac­com­mo­da­tion in a self-con­tained flat where the di­vi­sions of the room are tem­po­rary. There are no hard and fast rules about what con­sti­tutes a “tem­po­rary divi­sion” but as you plan to in­stall kitchens and bath­rooms it will be hard to ar­gue that the di­vided res­i­dences are tem­po­rary.

Our ex­pert re­porters and an­swer read­ers’ ques­tions. This week: rent-a-room tax re­lief, no-claims dis­counts and us­ing a trust to avoid the stamp duty sur­charge

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