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Shared occupancy test for rent-a-room relief will add ‘unnecessary complexity’

The government’s plans to change the rules on its ‘rent-a-room’ scheme, which allows people to earn up to £7,500 a year tax-free from letting out a spare room, is likely to ‘add unnecessary complexity to the tax system’, according to the Association of Accounting Technicians (AAT).

The government intends to introduce a new “shared occupancy test”, which means that relief can only be claimed when the landlord is present at the property during the rental period.

This will mean that those letting out their whole property will now have to pay more tax or to start paying tax if they have not done so before.


The government believes that the new shared occupancy clause will ‘return the relief to its original purpose and clarify its role in the wider property tax regime’.

The government policy paper states: “This ‘shared occupancy’ test will provide that the individual, or a member of their household, in receipt of income, must have a ‘shared occupancy’, a physical presence for all or part of the period of the rental, with the individual whose occupation of the furnished accommodation is generating receipts.


“Those taxpayers that do not satisfy this test will no longer be eligible to claim rent a room relief on those receipts.”


But the AAT fears that the new test will add unnecessary complexity to the tax system and has other shortfalls, particularly around how shared occupancy can be proved.

The shared occupancy test will effectively bring an end to rent-a-room relief for those renting their whole properties out or who rent out a single room whilst they are away. These landlords will have to rely on the much lower £1,000 property allowance instead.

Phil Hall, AAT’s head of public affairs & public policy, said: “This will add unnecessary complexity to the tax system. Many will be forced to complete a self-assessment tax return when they otherwise wouldn’t and many more will be required to laboriously keep records of when they were and weren’t at home.

“It’s also likely to reduce accommodation availability and choice because many “landlords” will simply choose not to rent out their spare rooms when they are not present.

“Rent-a-room relief is one of the few ways in which people can supplement their annual earnings in a relatively simple and tax efficient manner but this new test will change that.”

Although the legislation is due to come into force shortly in April 2019, it remains unclear as to whether or not HMRC will require taxpayers to prove their shared occupancy or if they are simply relying on taxpayers honesty.

Hall added: “If no proof is required then the scheme will be open to widespread abuse. If proof is required, it’s difficult to see exactly how shared occupancy can be proven in practice, especially when this may relate to irregular nights here and there. Enforcement will be a nightmare and I’m not sure HMRC have properly thought that through.

“A shared occupancy test is a headache being created for what the Treasury’s own analysis states will be a “negligible” impact on tax receipts.

“The best solution for landlords, tenants, policymakers and the economy would be to drop these plans and allow rent-a-room relief to continue as it has for over 25 years as a simple to administer, easy to understand tax relief that’s available to all.”

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Poll: Do you think the government’s plan to introduce a new 'shared occupancy test' or rent-a-room relief will add 'unnecessary complexity' to the tax system ?


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    This article is missing the real point which is that this relief was fair at around £4500 when landlords got tax relief on mortgage interest. It should have been withdrawn when the landlord tax relief was withdrawn and if kept should only apply where a room is let as a long term home, not as a holiday let. It's also crazy that all furnished holiday lets qualify for better mortgage tax and CGT relief than long term lets providing long term affordable homes.

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    I would have assumed the point of raising the allowance from £4500 to £7500 was to reflect an increase in rents. At a £4500 tax free allowance, most resident landlords would probably end up paying some tax if they let a spare room for 12 months of the year, and even having to pay a little might have be enough to deter some. That could have been considered counterproductive when at least one point of providing a tax free allowance was to free up unused spare rooms in peoples houses.
    I don't see that S.24 and the Rent A Room allowance are in way related or connected, S.24 being a separate matter entirely. In my opinion a resident landlord ought to be able to let a spare room in their home in any way they see fit, should their income from doing so exceed £7500 then they should pay tax on it, if not carry on as usual.
    All the government has achieved here is to over-complicate things and muddy the water.


    I don't know why someone would give up earning £4600 from a spare room just because they had to pay tax on the last £100 of that. The rent a room allowance has been hijacked by air BNB landlords avoiding tax and normal landlords providing homes are making up the shortfalls.

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    • S S
    • 14 May 2021 14:43 PM

    The point about rent a room is that the landlord is still living in the house - If you are doing that no problem but if you are trying to claim a lodger allowance when the house is being rented out (without the landlord in the premises) then that's not a "lodger" and should not be allowed.

    Any let where the landlord is not present and living in the property is taxable and should be declared as such and LL taxed on it.

    Fairness is required for all housing solutions and loopholes where people are claiming allowances (which are subsidised by the taxpayer - ie you and me!) but effectively "running a short term letting business" should not be allowed. LL have to meet strict regulations etc and fleecing the system by "pretending" that its an allowable non-taxable income doesn't help anyone in the long term (other than the person ripping off the taxpayer).


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