How to Easily Make £7,500 Tax-free in the UK
This is a fantastic way to help you get through the cost of living crisis
Not only will you be making money, but you’ll also be helping others out at the same time. This will only work if you have a spare room in your home.
You also need to be willing to share your home with either friends or strangers.
It’s super-easy and beats working a second job. What you need to do is rent out a spare room in your home. The best part is that any rent up to £7,500 a year is completely tax-free. You don’t even need to declare the income to HMRC, the UK equivalent of America’s IRS.
Eligibility
To be eligible, you need to follow a few simple rules.
- You need to be a resident landlord — this scheme doesn’t apply if you’re renting out an entire unit
- You can join the scheme whether you own or rent your home — if you rent, check with your landlord to make sure sub-leasing is allowed
- You are also eligible if you run a bed and breakfast or a guest house
Note that you cannot use the scheme for homes converted into separate flats.
See full details on the following HMRC website:
How much tax will you save?
If you’re on the basic income tax rate, you’ll save 20%, or £1,500 a year. If you pay the higher tax rate, you’ll save 40%, or £3,000 a year. These figures assume you’re getting a rental income of £7,500 or more.
You’ll need to pay tax on rental income above £7,500.
An annual income of £7,500 a year is equivalent to £625 a month.
You’d be able to rent out a spare bedroom for £625 in many parts of the UK.
But wait, there’s more
As all those corny late-night shopping channels always say…
But wait, there’s more
Imagine you rent out a room in your home at £625 a month for 10 years and invest that money. At an 8% rate of return, you’d end up £198,000.
Over 20 years, you’d end up with £357,000.
Investing over 20 years with a 10% annual return would leave you with £452,000.
You’d be almost halfway to becoming a millionaire. This is a fantastic way to build wealth if you’re someone that doesn’t mind sharing their home.
If you invest via an ISA, much of this could be tax-free.
Use the investment calculator below if you want to input different figures.
