The Association of Taxation Technicians (ATT) has welcomed today’s announcement by the Government that they will be making only limited changes to rent-a-room relief. The ATT had been concerned that significant restrictions could have been introduced to this valuable relief.
Draft Finance Bill 2018-19 legislation published today proposes that rent-a-room relief1 stay in place but, from 6 April 2019, it will be available only where the landlord is in occupation for some or all of the time that they are letting their home. This means that when a family goes on holiday and lets their whole house in their absence, any income will no longer be eligible for rent-a-room relief. However, the far more common use of the relief by those letting spare rooms to lodgers or short-term holiday guests will not be affected.
This announcement follows a call for evidence earlier this year by the Treasury. The ATT responded to the call2 based on the results of a joint survey of both ATT and Chartered Institute of Taxation (CIOT) members which received almost 700 responses. Members responses to this concern were split, with 52.6% of respondents agreeing that the relief should remain available for holiday letting, and 47.4% feeling it should be restricted to residential lets only.
Jon Stride, Co-chair of ATT’s Technical Steering Group, said:
“Rent-a-room relief is a popular and valued incentive for people with spare rooms in their homes to take in a lodger. We are pleased that it will remain mostly intact.
“We did not want to see any more complexity in this relief, which is intended to keep people out of the self-assessment tax system. One of the areas where we had called for more guidance was whether or not the relief was still available when the landlord was absent on holiday during the letting. This new legislation will put the matter beyond doubt.
“Other options for reform had included restricting the relief to letting of more than 30 days. This would have been complex to police and, without further complications, could have excluded those who provided accommodation during the mid-week period only. We also had concerns that any restrictions on the length of stay would have restricted use of the relief where people open up their homes to visitors during events such as the Edinburgh Fringe or Cowes Week. This may have discouraged residents from providing additional accommodation during times of high demand.
“Those who were using the relief to cover letting during their absence and will now lose the relief from April 2019 will need to consider if they can use the new £1,000 property allowance3 to exempt some or all of the income they receive.”
Notes for editors
- Rent-a-room relief allows individuals to earn up to £7,500 of tax-free income from letting out furnished accommodation in their main or only residence. The relief can apply to room let to a single individual for 365 days of the year, or lets of one night each to 365 different individual. The relief is separate from the new £1,000 property allowance introduced from April 2017, which applies more generally to any income an individual derives from their interest in a property. HMRC believe that there has been a 38% increase in claims in the seven years from 2007-8 to 2014-15.
- The ATT’s submission to the Treasury’s call for evidence can be found here. The original call for evidence can be found here.
- More guidance on the new trading and property allowances can be found on HMRC’s website here.