Property allowance in addition to rent-a-room

Suppose I own a house and both: 1. Rent out one of the bedrooms, furnished, to a lodger, under the rent-a-room scheme. 2. Rent out a separate room, a gallery area, to someone who uses it as a yoga studio, receiving less than £1000 per year in income. Does the property allowance tax exemption apply to the income from (2), even though I am also using the rent-a-room scheme?

Hi,

As per PIM4012, rent-a-room applies to furnished lettings only, meaning that if the income from (2) is unfurnished, separate rules would apply.

PIM4012 - Rent-a-room: more than one source

Please also see PIM4030, which states expenses may still be claimed when using rent-a-room relief.

PIM4030 - Rent-a-room: receipts above exemption limit

Thank you.

The second room would be rented out not to a lodger, however, but to people who would use it to conduct business (e.g. hosting yoga classes, meditation sessions, etc). https://www.gov.uk/government/publications/rent-a-room-for-traders-hs223-self-assessment-helpsheet/hs223-rent-a-room-scheme-2023 "You cannot use the scheme if the accommodation is: [...] used as an office or for any business — you can use the scheme if your lodger works in your home in the evening or at weekends or is a student who is provided with study facilities" So my interpretation is that this couldn't come under rent-a-room? But if so, then would the income stream from that second room able to come under the £1000/year property tax exemption? (Referring to this allowance: https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income)

Hi Tara Swain,
Given the circumstances you have set out I can confirm you can claim the tax free allowance for the 2nd source of property income.
Thank you. 

 

Just to clarify what HMRC have said (I may be mistaken but it doesn't sound like you've understood them), you cannot use the rent a room scheme even for the furnished letting if you also have receipts from unfurnished accommodation or for letting property that isn't residential at all (as in the case of the room being let as a yoga studio). This means you can either claim your actual expenses against the total rental income from both lettings or the property allowance of £1000. But you cannot claim rent a room relief for either letting.