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The rent-a-room scheme is a set of special rules designed to help homeowners who rent-a-room in their home. The limit increased to a generous £7,500 from 6 April 2016 and remains at the same level for 2018-19.

The government is currently examining the design of the scheme to explore whether the rules provide the right incentives for the rental market as it exists today. The main area under review is whether short-terms lets are an appropriate use of tax relief,
or whether the relief should more explicitly support residential accommodation provided on a longer-term basis, or for a certain purpose.

The relief currently applies only to the letting of furnished accommodation, and is usually used when one bedroom is rented out in a furnished house to a lodger. As we mentioned above, the relief is becoming more widely used as more and more people rent
out rooms online for short-term lets. The relief also simplifies the tax and administrative burden for those with rent-a-room income up to £7,500. The limit is reduced by half if the income from letting accommodation in the same property is shared by a joint
owner of the property.

The rent-a-room limit includes any amounts received for meals, goods and services provided, such as cleaning or laundry. If gross receipts are more than the limit, taxpayers can choose between paying tax on the actual profit (gross rents minus actual expenses
and capital allowances) or the gross receipts (and any balancing charges) minus the allowance – with no deduction for expenses or capital allowances.

Source: New feed