Rent-a-room relief – ICAEW responds to consultation

ICAEW has responded to the government’s recent call for evidence on rent-a-room relief. Our submission has been published as ICAEW Rep 25/18 

Rent-a-room relief was introduced in 1992 with the intention of increasing the supply of housing across the country: for example, enabling people to rent somewhere permanent to live; allowing people to work away from home during the week; and providing accommodation for students, perhaps using the spare room created by the departure of the home-owner’s own child to university. 

The limit for relief was increased from £4,250 to £7,500 in 2016/17. That, coupled with the growth of internet property rental sites like Airbnb, has caused the government to reassess the relief and its purpose, as the amount it costs the Exchequer is increasing. The call for evidence is to enable the government to understand how the relief is being used and how widespread its use is. Individuals who fall within the rent-a-room relief parameters and do not have to do a self assessment return are an unknown quantity, as they do not have to claim the relief – see our news item when the call for evidence was launched. 

The particular areas of concern appear to be around the use of rent-a-room relief for short-term letting such as holidays lets. Given these concerns, it seems surprising that the relief threshold was increased in 2016 from £4,250 per annum, quite a few years after the rise in internet providers. The advent of the internet means it is now very easy for landlords to match their property with potential renters. The days of a postcard in the local newsagent’s window advertising accommodation are fast disappearing. It is now much easier to rent a property or room for a few days whereas previously the “matching” process was more difficult and time-consuming, with the result that lets were for longer periods. 

A big advantage of rent-a-room relief is its simplicity. Any changes to the relief will have to be measured against this simple model; any increase in complexity and cost of compliance will need to be deducted from any additional tax collected. 

The relief was introduced as a response to a housing shortage by providing an incentive for people to make available spare capacity in their homes for rent. There is still a housing shortage so the underlying policy purpose of the relief still appears to be valid.