How to Make £7500 A Year!
Sometimes you may need to make more money than you get from on-line surveys. At times like this you can make use of a little know government scheme that allows you to earn £7500 in a year while paying no tax! Rarely does the lovely ‘no tax’ status come to any money earned, especially to the tune of £625 a month. The ‘Rent-a-Room’ scheme is completely legal and you’ll even find it on a the government website.
There are a few things to be aware of but the gist of it is;-
- You must be a live-in Landlord
- A furnished room.
- You receive £7,500 or less in the tax year.
- No need to inform the tax man.
Lets take these one by one.
Simple one this – you must live in the property. You can’t use the Rent-A-Room scheme if you rent out the whole property – even if your rent for the whole property is less than the £7500 a year limit. For this reason you will need to be a live-in landlord. Uniquely, this is also something that can benefit home-owners AND tenants. If you rent a property then, if your lease allows it, you could rent a room out via the Rent-A-Room scheme. A great bonus for everyone!
The room MUST be furnished. This should include a minimum of a bed however I would also suggest that you think about the furniture you would need if you were renting a room. For me this includes a wardrobe, a chest of drawers, a desk and a chair. If you need any of these larger items of furniture then do check on Free-cycle or your local facebook selling groups. There is no need to spend lots of money on these items but you do need to make sure they are usable. If you only have old, broken or damaged furniture in your room then you may find the person renting from you doesn’t treat your room well – definitely something you want to avoid.
£7500 in a Tax Year
This can be separated into two – you’ll either want to rent out for the whole year or part of the year. If you are renting for the whole year then the maximum a month you can charge is £625 (or £125 a week). If you are renting out for only part of the year then you need to divide the period of time by the £7500. For example if you are renting out for 6 months of the year you could charge £1250 a month. This is important as if you earn over £7500 then you must pay tax at your appropriate rate on the amount over this. More importantly you are unable to make deductions on this additional tax. Under the Rent-A-Room scheme your £7500 is tax free but it allows no deductions so factor this into your decision.
Its the Tax Man!
The beauty of the Rent-A-Room scheme it is not only tax free, but if you are employed you don’t need to inform the tax man unless you are looking to change either out of the scheme or back into it. If you are self-employed (or you have to complete an annual tax return) then you will need to declare this income. The benefit of doing this is the smugness you can feel when you have a £7500 income with no tax against it!
This is not the only way to earn money from a property however it can give you the largest tax-free income with very little hassle for you.
Are you a live-in landlord? How is that working for you? Let me know in the comments below if you have any questions about the Rent-A-Room scheme.