PIM4012 - Rent-a-room: more than one source

Summary

To decide whether rent-a-room applies, it is necessary to look at the total income from all relevant sources. You may need to think carefully about cases where there are several sources.

Technical detail

If the taxpayer has more than one dwelling producing letting income, income from the only or main residence can only be within rent-a-room if it is a separate source from the income from other properties.

Two sources in the same residence

The taxpayer may have two rent-a-room sources in the same residence, for example rental income from a lodger and trading income from a bed and breakfast business. But the rent-a- room rules must be applied to all sources in the residence, because it is immaterial whether the rent-a-room receipts are treated for tax purposes as derived from one source or from two or more separate sources.

It would be incorrect to exempt one of the sources in isolation because it was below the limit, if the combined total was above. All relevant sums in respect of the residence need to be considered. So either they are all in or they are all out.

Where there is more than one source within rent-a-room and the total receipts are above the exemption limit see PIM4030.

Furnished and unfurnished lettings in the same residence

Rent-a-room applies to furnished lettings only. If the taxpayer has any unfurnished letting in his only or main residence, then he or she is not a qualifying individual. Therefore any furnished letting the same taxpayer has in the same residence cannot attract rent-a-room relief.

Letting in residence part of a wider source

Income from the only or main residence cannot be within rent-a-room if the taxpayer receives rent from other properties and, on the facts of the case, all rents constitute one source of income (an example would be a guest house business conducted partly in the taxpayer's main residence and partly in a separate property).

Where no trade is being conducted, the ‘source’ will usually be the letting agreement.

Do not make enquiries if the taxpayer presents computations to show the only or main residence as a separate source unless you have good reason to suppose that they are wrong.