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Will My £9,000 Room Rental Income Be Tax-Free?

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Q: I’m planning to rent out a room in my home for £9,000 this year. Am I right in thinking that some of this income will be tax-free? If so, what are the rules?

A:For anyone in your position it’s worth knowing about the Rent-a-Room Scheme. This allows you to earn up to £7,500 tax-free from letting furnished accommodation in your home for the 2024/25 tax year. Since you’re planning to rent out a room for £9,000, the first £7,500 of this income will be tax-free. The remaining £1,500 will be subject to income tax based on your marginal tax rate.

The tax exemption for this type of income under £7,500 is automatic, so you don’t need to do anything. But when it goes over £7,500, you must inform HMRC and choose whether to opt into the scheme by submitting a tax return. Or alternatively, you can choose to be taxed on the rental profit (total income minus allowable expenses) if that results in a lower tax liability.

It’s also worth noting that the £7,500 tax-free allowance is halved if you share the income with your partner or someone else.

You’re also eligible to opt into the scheme if you run a bed and breakfast or a guest house, but you can’t use it for homes converted into separate flats.

If you’d like more information about tax issues relating to property and rental income, do get in touch.

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