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HMRC internal manual

Property Income Manual

Rent-a-room: receipts below exemption limit

Summary

  • If gross receipts are below the exemption limit there is no charge to tax.
  • But the taxpayer can elect for the rent-a-room rules not to apply. In that case the usual balance of income less expenditure would be used. The taxpayer might want to do this, for example, where there was a loss.

Are receipts below the limit?

Entitlement to rent-a-room relief depends on the amount of all the relevant sums from lettings in the only or main residence in the basis period for the year of assessment. All the relevant sums include:

  • The rent itself.
  • Any sums paid in respect of meals, goods and services provided in connection with the use of accommodation. This will include, for example, cleaning and laundry services. The fact that such sums may be paid under a separate agreement is irrelevant if the goods or services supplied are connected with the use of the furnished accommodation.
  • Any ‘relevant balancing charge’. A relevant balancing charge is one arising on the activity for which rent-a-room relief is being considered - F2A92/SCH10/PARA9 (4) (for years up to 2004-05) and ITTOIA05/S788 (for 2005-06 onwards).

Do not count rent from letting other non rent-a-room properties.

What happens if receipts fall below the limit?

F2A92/SCH10/PARA9 (for years up to 2004-05) and ITTOIA05/S791 to S794 (for 2005-06 onwards) give exemption for a year of assessment when a qualifying individual’s receipts for the basis period from sources to which rent-a-room applies fall below their exemption limit. In that case they are treated as having:

  • no profit,
  • no loss,
  • no capital allowances or balancing charges for plant or machinery provided for the rent-a-room activity.

The duration of the letting is irrelevant as long as the limit is not exceeded. Two weeks letting at £2,000 a week would still be exempt provided there was no other letting in the year.

Where the total relevant sums are below the exemption limit and all of the qualifying conditions are met, the taxpayer is automatically exempt (unless an election is made for the exemption not to apply - see below) and no further action by the taxpayer is needed.

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Electing not to have the exemption

F2A92/SCH10/PARA10 (for years up to 2004-05) and ITTOIA05/S799 (for 2005-06 onwards) allow the individual to elect that the rent-a-room exemption is not to apply for a particular year so that losses could be utilised against other letting income outside rent-a-room. A fresh election is needed each year. You can find guidance on the time limits for making or withdrawing an election in PIM4050.