Thousands of Britons earning from letting their spare room or using parts of their home on platforms like Airbnb could be hit with fines in 2024 if they don’t declare their income as part of their Self Assessment.
The tax exemption is automatically applied to anyone earning less than £7,500 from renting a furnished room in their home, which equates to charging £625 per month for a room or £144 a week. This is halved if the person shares the income with a partner or someone else.
From January 1 Airbnb and other short let platforms will be required to send data on their clients’ earnings to HMRC, which could leave many casual landlords exposed - especially if their earnings are exceeding the Rent A Room threshold.
For many Britons who might be choosing to rent a room out to a lodger on a casual basis, they might not even be aware what tax they should pay or what to do if they exceed the threshold.
Mike Parkes, technical director at GoSimpleTax, says: “Whilst renting out a room can be a great way to earn an extra income, it’s important for those acting as landlords - even on a casual basis - understand that they still need to pay tax on what they earn.
“For many it will be an automatic exemption as they earn less than the Government’s threshold of £7500. Yet many might not realise they need to declare this income if it breaches the Government’s threshold of £7500. This can be easy to do if you’re charging more than £625 per month, and many won’t realise that they need to be liable for tax and income payments to HMRC if they earn above the limit set by the Government.
“Putting money aside for tax can mean these landlords will be prepared for when they complete a self assessment tax return, which is due by January 31st. Having control of finances, including paying tax and following HMRC guidance, is an important part of being a landlord and that also means being ready for the January 31st deadline.”
He continues: “With less than 50 days to go until the deadline, it can seem daunting to pay tax if money isn’t set aside but there are always options. The first is to get an up to date calculation of what is owed and then to understand what you do have to put towards it. The next step is to speak to HMRC and discuss options like a payment plan, which can mean you pay the tax owed but across a feasible and manageable monthly payment plan.”
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There will be a few nervous people out there 🆘🆘
Speak to HMRC? They have zero chance of that.
Thousands will fall foul of this unknowingly.
I think it’s time they raised the £7,500 allowance to help people who are prepared to let out a room in their homes. The allowance has been at this rate for many years and all costs have risen hugely since then. It would obviously encourage the provision of more homes (if only fairly temporary) for people.
Good point, and for struggling home owners taking in a lodger could be a good option and maybe better than selling their home and downsizing. Doesn't help tenants though as we don't want them subletting.
They first need to raise the personal allowance threshold. Since this is frozen, there is little hope of raising any other thresholds.
I would like to agree but it used to be £4’500, and there’s no allowance for licensed landlords only huge costs and targeted from all angles pay tax on every room and many pushed into the 45% income tax bracket with personal £12.5k allowance removed hardly going encourage landlords to house anyone.
The thing is none of my rooms equate to anything like £7.5k pa if that was the case your 3 bed Terrace let as 4 would be £30k pa so we are probably £10k short and taxed on every penny plus costs of licensing & Compliance.
It's only available to people taking a lodger in their own home, it doesn't apply to rental properties.
Why are your rooms so cheap? Surely in London rents are supposed to be way higher than elsewhere.
I've just let a medium size double bedroom (for single occupancy) for £600 a month (£7200 a year).
An ensuite has been £650 for the edge of town or £710 for a posh postcode for quite a while. They are bills inclusive.
With all the licensing and compliance costs it isn't realistic to be any cheaper.
There are plenty of far more expensive rooms even for lodgers with live in landlords.
£7500 is rapidly becoming insufficient for even a nasty room in a rough area in some parts of the country.
Yes my friend I am acutely aware its still rental income and the lodger is a renter whether he’s called a lodger or a Tenant he’s a person paying for his accommodation.
If HMRC is not careful and respect the tax payers, of the tax payers start revolting, the country will be in deep trouble.
All taxes have been raised but Helpline has been removed, how does this work?
Jo, very good London is a fools Paradise just because a property costs two or three times as much everyone including the Authorities assumes you must be rich don’t know how anyone could come to that conclusion must be farmers economics, Pound for Pound you are miles ahead of us and less Regulation or you had years of grace period.
I don’t know how many individuals could afford the rents you referred too, maybe getting some help or high paid digital academics who’s jobs won’t last very long. AI will be taking over their jobs and computers. The licensing Boroughs in London have added so much unjustifiable additional rules making it impossible to Comply even though the property was licensed 3 times before, they want us out that bad, even the Council’s staff don’t know the half of it. That will be Mr Gove’s chum probably from Harvard or such place who wrote the Computer program and it will all happen according to that.
Minimum wage is currently £10.42 an hour.
Assuming someone only works 37 hours a week (can't be bothered with overtime or a second job) they earn just over £20K per year.
Standard rental affordability calculation is to divide the gross annual pay by 30. That gives affordability of £668 per month (£8019 per year).
So the council is supplementing their shortfall in income with selective licencing money from landlords. What happens after they run out of this money?
I can see the council.using selective licencing money to buy properties and become landlords themselves. At least they don't have to follow the law imposes.to.the landlords.
Trouble with that is that councils are incapable of maintaining the social housing they all ready own which is why much of it was sold off over the years
When people are struggling to pay their bills so much that they resort to renting out a spare room... Why the hell is the government punishing them and trying to wring out every penny in tax. Times are hard and they should be ashamed of themselves.
Unfortunately a Labor government will punish the poor more.
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