Pads For Students - The Location For Student House Rentals

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Tax Benefit of Having Live-In Student Tenants

The perception of a student landlord is of managing HMOs. However, there is another area of housing. Catering to those who would prefer not to engage with the typical student living experience, there are landlords renting out rooms to individual students. It’s profitable and as you can see, there are tax benefits to renting out your spare room(s).

 

What is the Rent a Room Scheme?

Rent a Room allows anybody to earn rental income up to £7,500 tax-free per year through letting out furnished accommodation in a home in which they also reside. The idea is for residents to make a little bit of extra income by renting out spare rooms and provide one potential relief for the housing crisis by catering to a certain section of renters. The tax exemption is automatic assuming you earn less than the £7,500 threshold. This works out at roughly £625 per calendar month over 12 months or £833 per month over a 9-month student tenancy. The scheme is not new but until the tax year 2016-17, the threshold was just £4,250.

 

Restrictions

As expected, there are strict rules to prevent people playing the system. In order to qualify for this, It must be in the landlord’s primary home and the room must be furnished for the tenant. The tenant must use the same entrance as the other resident(s). There must not be a separate address (such as an “a” suffix or “lower flat” description). The homeowner is not permitted to create separate divisions within the building, effectively dividing it into two flats or creating an annexe. However, exceptions apply where home divisions are temporary. When registering a separate division, the HMRC may question how long the partition has been up and how long you intend it to remain.

Which Students Will This Appeal To?

It’s not discussed so much in the media more concerned with the HMO market, but there is a large student body who prefer to live in such an environment.

  • Post-graduate students: people studying master’s degrees and doctorates may prefer to live slightly farther away from the campus for the sake of comfort. They may also prefer the more sedate lifestyle of cohabiting with a couple compared to student living
  • Mature undergrad students: Students over the age of 25 are “independent mature”. In the majority of cases, they will have the same profile as post-graduates in that they want to be on the course and are not as interested in the typical student lifestyle
  • International students: For students moving from abroad, part of the experience of studying in another country is living reality in their new country of residence. Not knowing the country or the city, they too may prefer to live with a family or couple to learn the culture