The rent-a-room provisions provide relief from tax on rent and other associated receipts in relation to the use of furnished accommodation in an individual’s main residence, which can include a guest house or bed and breakfast establishment. Since 1997, the maximum relief on income received under rent-a-room has remained at £4,250.
With effect from 6 April 2016, the relief will be increased so that an individual who qualifies for rent-a-room relief will be able to receive income of up to £7,500 in a tax year without it being charged to income tax.
A significant increase of approximately 76% in the relief needs to be weighed against the fact that this is the first increase in the relief for 18 years! It will be particularly welcomed by those who receive income between £4,250 and £7,500, who will now be able to claim the increased relief and in the process, reduce their self-assessment liability.