Every little helps when the country faces a housing shortage of current proportions – especially when it comes to the demand for homes to rent.
As part of its efforts to increase supply, the government has been encouraging householders to let out any spare room or rooms they have in their home.
The incentive comes in the shape of tax relief on income from letting this space. A sign of the government’s continued commitment to providing this kind of encouragement to households was demonstrated in the decision to increase the initial tax-free threshold of £4,250 to £7,500 a year – reported Landlord Today.
How it works
If your earnings are less than the £7,500 limit, you don’t need to do anything. If the rental income exceeds that amount, you need to opt in, complete a tax return and claim the allowance.
You are eligible for the tax concession whether you own the property or are a tenant, provided it is the home you are also living in and your lodger shares a living room, kitchen or bathroom with you.
The length of any let may be either:
- periodic – so that it runs from one rent day to the next on an indefinite basis; or
- fixed term – when it lasts for an agreed number of weeks, months or even years.
If you didn’t reach any agreement on the length of the letting, it is automatically considered to be a periodic one – it might even be open-ended, for example, with your lodger staying on an as and when basis.
When you want any such lodger to leave the home they are sharing with you, you only need to give a reasonable amount of notice and do not need any order of the court to evict them.
In this way, the government’s Rent a Room scheme offers you the chance of earning a little extra, unexpected cash – with the bonus of the tax-free allowance.
Although you might not feel that you are a fully-fledged or full-time landlord, however, that is exactly the role you take on when renting out a room or rooms in your home. In many ways, you might consider yourself an “accidental landlord”.
Accidental or not, though, there is one very important facet of being a landlord that you might do well not to forget – and that is the importance of the appropriate form of landlord insurance.
Once you decide to let even a part of your home, your current insurer needs to know and, in receipt of that information, may limit the cover presently provided or charge an additional premium for maintaining the protection you need – for the structure and fabric of the building itself and for the contents you own.
To make sure that you have the appropriate form of landlord insurance, therefore, you might want to contact us here at UKinsuranceNET to consider the options.
With sufficient landlord insurance in place, you may let a room or rooms in your home and enjoy the tax breaks that government allows, whilst confident in the knowledge that your home remains adequately protected.