ATXP6 UK
Syllabus A1. Income tax A1a. Property and investment income

A1a. Rent a room relief

Syllabus A1a)

Property and investment income

What is rent a room relief?

Two methods to calculate the relief

This relief is based upon letting a room out in your main residence where you live. 

There are 2 methods under which the income from letting this room can be assessed. 

One of the two methods below can be chosen

Method 1

If an individual lets a room, furnished, in their main residence – the gross rent up to £7,500 is exempt.

Alternative – rent a room relief calculation:

Gross rent x
Less: rent a room relief  (£7,500)
Property income  x

Method 2:

This exemption may be ignored if under normal treatment (rental-allowable expenses) the tax payer is able to generate a lower assessable income, that is where the allowable expenses exceed £7,500.

Ordinary calculation:

Gross rent x
Less: rent a room relief  (x)
Property income  x

The election for 2018/19 must be made by 31/01/2021 and stays in force until it is revoked.

Illustration:

Sunder rents a room in his main residence. Gross rents are £145 per week and expenses amount to £120 per year.

  • What is his property income assessable and when does the relevant election need to be made?

Solution:

Ordinary calculation:

Rent receivable 52 weeks * £145 =  £7,540
Allowable expenses (£120)
Property income £7,420

Alternative – rent a room relief – calculation:

Rent receivable  £7,540
Rent a room relief exemption (£7,500)
Property income £40

Sunder will decide to elect the rent a room relief exemption as this produces the lower property income assessable. He will have to make this election by 31/01/2021 for income receivable in 2018/19.