I'm confused about rent-a-room tax relief and how it works. I want to build three separate rooms in my house with their own entrances and rent them out to three individuals. These rooms will also have their own kitchen and toilet.
I'll be living in my own part of the house. Am I able to claim the rent-a-room relief?
From the situation you describe, it doesn't sound like you will be able to claim rent-a-room relief.
The scheme applies only to landlords who let a furnished room to a lodger in their own home, or to those who run a guesthouse or bed and breakfast. Short term lettings, such as those found on Airbnb, are also covered. The first £7,500 earned from letting out rooms in these cases is tax-free.
However, it sounds as if you plan to create separate residences that will no longer be part of your home. They will have their own entrances and facilities.
There is an exception if you let furnished accommodation in a self-contained flat where the divisions of the room are temporary.
There are no hard and fast rules about what constitutes a "temporary division" but HMRC will question how long the partitions have been in place and how long they are intended to remain. The taxman will also want to know if the separate residence has its own address and entrance.
As you plan to install kitchens and bathrooms in the property, it will be hard to argue that the divided residences are temporary.
Unfurnished rooms and rooms that are being used by others as an office are also disallowed. Landlords who let rooms while they are abroad cannot claim the tax perk.
Rent-a-room relief is brilliant for live-in landlords, but you should be aware the scheme is currently under review for short-term lets.