Rent a Room relief – changes afoot


Feb 02, 2018



Rent a room relief was initially intended to encourage home owners to offer up their spare room to a lodger, who might want to benefit from furnished accommodation whilst moving around the UK for work or study.

However its original purpose now appears to have become somewhat warped, thanks to the growing popularity of online accommodation websites such as Airbnb and HomeAway, which enable home owners to attract a large network of holiday makers as well as lodgers.

Consultation on rent a room relief

The government has now become worried that rent a room relief is being manipulated by home owners, who are offering leases for any purpose or length of stay.  This concern has lead to the launch of a consultation document by HMRC.  Rent a room relief requires relatively little information to be submitted by home owners, and this lack of data means that the consultation stretches to 13 questions, two of which hint at key reforms.

The first of these reforms could be the application of a ‘residential’ test.  This means that tax relief will only be applied to home owners who rent out their spare rooms for residential purposes, not for holiday accommodation.   For example, a student renting a room for an academic year would meet the residential test, but not guests staying for a short break.

This style of resident test already exists in Ireland and France.  And although the UK government’s consultation does not suggest that rent a room relief has been linked with tax evasion, in France Airbnb has recently been told to withdraw its use of a payment system which allowed home owners to receive rental income without it going via their bank accounts.

The second possible reform which is implied in the consultation document concerns the duration of the lease.  It appears that the government is planning to apply a minimum rental period of 31 days, which would thereby reduce the chances of the tax relief being used for holiday accommodation instead of residential lets.

The deadline for submitting responses to the consultation is 23 February 2018, after which date we can expect to hear what changes will be implemented to this tax relief going forwards.  If you have any questions, or are keen to submit a response to the consultation, please get in touch.