Benefits of claiming rent-a-room relief

Statistics in 2023 show that 28% of young people aged between 20 and 34 years were living with their parents. Having an extra adult in the house means that groceries, utility bills and other living expenses would increase and ultimately means more costs.

Rent-a-room relief was introduced by the government to allow for more low-cost accommodation whilst enabling individuals to earn tax-free income from letting out their main residence.

The threshold for the 2024/25 tax year is set to remain the same at the gross amount of £7,500 per year. Note that two persons are allowed the share of the property income which is £3,750 each. If three or more persons own (and live in) a property together and sub let a room, each individual is allowed £3,750 (overall relief of £11,250). Additionally, no National Insurance contributions are levied on this income.

Relief is automatically applied meaning there is no need for a claim, the income limit covers all charges such as cleaning, laundry or meals in this relief that relates to the rental service.

If rental income is more than £7500, the landlord(s) can still benefit from the scheme but would pay tax on the amount that has exceeded the limit. Relief in this case is not automatic and a claim is required via a tax return. However, If the rental income is less than the limit, relief is automatically applied and there is no tax to pay or anything to report but conditions must be met and cannot be applied where:

• The taxpayer is absent from the residence due to working abroad.
• The room is let as office accommodation, a storeroom or a garage.
• The property is a Buy-to-Let, or a holiday let not also occupied by the landlord.
• The residence is permanently divided into two or more residences.
• The letting is to or by a company or partnership.

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