HMRC rule means UK households with a spare room could be owed £7,500

HMRC's top ways to earn cash for homeowners have been revealed - and households up and down the country could earn as much as £7,500 tax-free all by letting out furnished rooms in their houses. Nojan Rahimi from Blutin Finance explained all.

He said: "While most homeowners are familiar with paying this annual tax, not everyone is aware of the discounts and exemptions available. For example, if you live alone, you are entitled to a single person discount of 25 per cent.

"Additionally, if your property is unoccupied and unfurnished, you might be eligible for a temporary exemption." He also described Capital Gains Tac (CGT) as "one of the more significant yet often misunderstood taxes".

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Speaking out, Rahimi said: "If you decide to rent out your property, there are additional tax implications to consider. Rental income is subject to Income Tax, and you must declare this income on your annual tax return. However, many homeowners are unaware that they can deduct certain expenses, such as repairs, letting agency fees, and mortgage interest, which can reduce the taxable amount."

He also shed light on Principal Private Residence Relief (PPR) which means, if you sell your main home, you are generally exempt from CFT. However, if you have used part of your home exclusively for business, that portion might be liable for CGT.

Annual Tax on Enveloped Dwellings (ATED) is also available if your property is owned by a company and worth more than £500,000. This is an annual tax, and failure to pay can result in significant fines, Nojan has said.

Remember to check for energy efficiency improvements, too, as the Cost of Living crisis continues. The cost of certain energy efficiency improvements, such as installing insulation or double glazing, can sometimes be deducted from rental income, reducing your tax liability, he went on.