Clive Mackintosh, head of private client practice, PricewaterhouseCoopers said:
“Despite the taxman’s interest, it is possible to earn significant sums and to pay little or no tax on rental income by making use of ‘rent a room’ relief. This relief applies when an owner lets out furnished residential accommodation in their main residence and covers annual rents up to £4,250.
“It’s important to remember that the Inland Revenue frequently carries out checks to ensure that the rental income and appropriate tax is paid by those individuals advertising their homes for let. The Revenue won’t have any qualms about handing out a hefty penalty, charging interest on the tax bill or demanding payment for back taxes to any individual not meeting the taxman’s requirements.”
Tax on rental money received that doesn’t qualify for ‘rent a room’ relief is calculated by comparing rents received with expenses incurred and taxing the excess.
