ACCA TX ^UK Syllabus B. Income Tax And Nic Liabilities - Rent a room relief - Notes ^{3 / 9}

Two methods to calculate the relief

This relief is based upon letting a room out in your main residence where you live. 

There are 2 methods under which the income from letting this room can be assessed. 

One of the two methods below can be chosen

Method 1

If an individual lets a room, furnished, in their main residence – the gross rent up to £7,500 is exempt.

Alternative – rent a room relief calculation:

Method 2:

This exemption may be ignored if under normal treatment (rental-allowable expenses) the tax payer is able to generate a lower assessable income, that is where the allowable expenses exceed £7,500.

Ordinary calculation:

The election for 2024/25 must be made by 31/01/2027 and stays in force until it is revoked.

Illustration:

Sunder rents a room in his main residence. Gross rents are £145 per week and expenses amount to £120 per year.

• What is his property income assessable and when does the relevant election need to be made?

Solution:

Ordinary calculation:

Alternative – rent a room relief – calculation:

Sunder will decide to elect the rent a room relief exemption as this produces the lower property income assessable. He will have to make this election by 31/01/2027 for income receivable in 2024/25.