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Make Money Tax Free With the Rent A Room Scheme

Earn Up To £4,250 Tax Free, Just Don't Forget the Lodger Agreement!

Aug 14, 2009 Carol Finch

More UK homeowners are looking for ways to earn extra cash to help them ride out the recession. The Government backed Rent A Room Scheme could give a tax free solution.

It's fair to say that most UK consumers worry about their finances at the moment. Since the credit crunch turned into the recession an increasing number of people have become more concerned about issues such as losing their jobs or their homes and many worry much more about their debts than they used to. These are uncertain times and nobody can predict what might happen. Consequently, there has been a swing towards saving rather than spending and a lot of homeowners are turning to the Government's Rent A Room scheme to make some extra cash.

What Is The Rent A Room Scheme?

This is a Government backed initiative that allows a homeowner to rent a room to a lodger without any tax charges levied on the money that they make from rent. Homeowners can earn up to £4,250 at the moment under this scheme without being liable for tax. The space that can be rented out under the terms of the scheme has to be furnished and it cannot be self-contained.

What Are The Advantages Of The Rent A Room Scheme?

Up to £4,250 can be earned a year as rental income without having to pay tax.
The extra money could help go towards paying mortgage, bills and living costs.
This income could give a cash cushion in these difficult times.

What Are The Disadvantages Of The Rent A Room Scheme?

Homeowners will have to share their homes with their lodger -- to qualify for this scheme the lodger cannot live in a self-contained unit and will have to share facilities such as bathrooms, kitchens etc.
It can be difficult to share a home with a complete stranger.
Homeowners can't claim expenses and costs against their letting.

Is A Lodger Agreement Necessary?

People taking advantage of the Rent A Room scheme don't necessarily have to produce a full-blown tenancy agreement. It may, however, be worth looking at using a formal Lodger Agreement. This will help protect the rights of both parties.

Where To Find Rent A Room Lodgers

Some homeowners will simply use the Rent A Room scheme to let a room to a friend, colleague or someone that is known to them. Many, however, will have to find their own lodger. They may choose to advertise in their local paper, in newsagents' windows or on bulletin boards. Online sites that bring together rent a room landlords and lodgers may also be worth looking at. SpareRoom, for example, is an online service that enables homeowners to advertise their space to prospective lodgers.

The copyright of the article Make Money Tax Free With the Rent A Room Scheme in Personal Budgeting/Finance is owned by Carol Finch. Permission to republish Make Money Tax Free With the Rent A Room Scheme in print or online must be granted by the author in writing.

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