Homestay Host: Rent-A-Room Scheme and Personal Tax Allowance - different scenarios please help!

JBroadstairs

Using the rent-a-room scheme I understand that I can earn £7500 without declaring my earnings.
Scenario 1: If I was to exceed £7500, can I use my personal allowance of £12,570 before I need to pay tax? (So £7500 + £15,570 = £20,070). I have no other earnings and no other income.

Scenario 2: If I was to exceed £7500, and I claim a pension, would the pension count as income and therefore I need to pay basic tax (20%) on anything over the £7500?

Thanks for any help given.

[Deleted User]

You are confusing income, allowances and reliefs. 

If you have up to £7500 from rent a room scheme it is covered by the relief of £7500. You have no taxable income. 

You have a personal allowance of 12570 to set against all taxable income from all sources, including any pension that you may soon have. In situation 1) you have no taxable income from the room being rented and the 12570 allowance remains intact. 

If your pension was above the 12570 personal allowance any other taxable income would be taxed at 20% including any property income after taking into account the 7500 rent a room relief - scenario 2). 

JBroadstairs

Thanks Ferro - that makes sense now!  Ferro said:

You are confusing income, allowances and reliefs. 

If you have up to £7500 from rent a room scheme it is covered by the relief of £7500. You have no taxable income. 

You have a personal allowance of 12570 to set against all taxable income from all sources, including any pension that you may soon have. In situation 1) you have no taxable income from the room being rented and the 12570 allowance remains intact. 

If your pension was above the 12570 personal allowance any other taxable income would be taxed at 20% including any property income after taking into account the 7500 rent a room relief - scenario 2). 

  

sheramber

Scenario 1

https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme

How it works

The tax exemption is automatic if you earn less than £7,500. This means you do not need to do anything.

If you earn more than this you must complete a tax return.

You can then opt into the scheme and claim your tax-free allowance. You do this on your tax return.

You can choose not to opt into the scheme and instead record your income and expenses on the property pages of your tax return.