The government has published Call for evidence - rent a room relief, aimed at obtaining information as to how it is used, whether it works as intended and what alternatives their might be.
In Budget 2017, it was confirmed that a consultation would be published which would look to ensure that Rent A Room relief was better targeted at long term letting.
This consultation did not happen, but in Autumn Budget 2017 the government confirmed that a call for evidence would be issued.
Currently, there is an income tax exemption of £7,500 for rental income earned under the rent a room scheme. Where this is being claimed, the new £1,000 Property Allowance cannot be claimed.
Evidence is being sought about the following:
- Current use of the relief
- Is the relief working as the government intends?
- Evidence and options for reform.
HMRC are looking for feedback from anyone with evidence or experience of rent a room relief.
Responses must be in by 23 February 2018 and can be emailed to
See HMRC: Call for evidence - rent a room relief.
Update
HM Treasury has published 'Rent a room relief: summary of responses'.
Call for evidence questions
Current use of the relief
- Do you have evidence that could help the government understand more about the number of individuals benefitting from Rent a Room relief, and the type of activity that they are carrying out?
- Do you have any evidence that suggests that there are increasing numbers of people letting out rooms in their main home? If so, do you have any evidence that suggests this relates specifically to holiday or guest accommodation rather than residential? Has there been a move towards one or the other over time?
- Is the use of the relief generally by individuals letting out rooms for residential purposes, or as holiday/guest accommodation, or for a different purpose?
- To what extent do those using the relief choose whether to advertise to lodgers for certain purposes (e.g. residential versus holiday/guest accommodation), or are those using the relief responding to demand in the market? If it is a choice, what drives that decision?
- To what extent is the length of tenancy for lodgers a consideration for those using the relief, when advertising a room for rent?
- Do you have any evidence that there are regional differences in whether rooms are being rented out for different purposes or tenancy lengths?
Is the relief working as the Government intends?
- To what extent do you think the existence of Rent a Room relief provides an incentive for those using the relief to let out rooms in their home / take on a lodger? If Rent a Room relief did not exist, and only the £1,000 property allowance were available to use against this income, would current users of the relief still take in a lodger?
- How significant is the role of Rent a Room relief in supporting the government’s wider objective to have a diverse supply of housing options? What impact, if any, do you feel the relief is having on the supply of housing? Are there any other economic or social benefits from the relief?
- Do you think that all types of letting activity, regardless of the purpose or length, should be able to benefit equally from Rent a Room relief?
Evidence/options for reform
- Do you have experience or knowledge of a system for taxing Rent a Room income that is simpler, fairer or more effective than that in the UK?
- One example the government is aware of is in Ireland and France, where there is a ‘residential’ test applied to the equivalent tax relief. Do you think the UK should look to restrict access to Rent a Room relief only to those homeowners letting out their rooms for residential purposes? What would be the pros and cons of such an approach?
- Do you think that there should be differences in eligibility for Rent a Room relief according to type of letting activity, purpose or length? Do you think homeowners should only be eligible to claim Rent a Room relief where they are offering a room for let on a longer-term basis (e.g. 31 days or more)? What would be the pros and cons of such an approach?
- Do you have any further ideas or evidence about how the UK might reform rent a room relief?
