A 2015 study of the economic impact of Edinburgh’s festivals found that they generated upwards of £300 million for the Scottish economy, more than 90% of which directly benefited the capital city.
The highest profile of these – August’s festival and fringe – can be boom times for local residents who may be considering renting all or part of their home for summer’s swansong.
While recent headlines have focused on the capital’s thirst for a new ‘tourist tax’ and cities across the world rethink their attitudes towards online ‘disruptors’ like Airbnb, a tax incentive enjoyed by some city residents is in line to be curtailed.
So-called ‘short-term’ lets are an attractive source of extra income. A quick Google search of Edinburgh letting agents sees some boasting of returns as much as 320 per cent higher than longer-term lets.
Thanks to Airbnb, it has never been easier to benefit from the capital’s tourist boom and earn income from your home.
However, changes proposed earlier this month by the UK Government look set to restrict access to ‘Rent a Room’ tax relief, a measure first introduced by John Major in 1992 as a means of increasing the availability of affordable accommodation.
In return for renting furnished accommodation to a lodger, a homeowner can benefit from a tax break on the first £7,500 of rental income (or £3,750 each if they jointly own their home with a spouse or partner).
While the focus of the relief was to provide a tax break to those renting a room in their home to a long-term lodger, the government has always acknowledged that it has been available to those letting their home for short-term or holiday lets.
The government is now planning to restrict the availability of the relief to live-in landlords by introducing a new ‘shared occupancy’ test enforcing both the letter and spirit of the law.
The change will have no impact on landlords who remain in the home for all or part of the time they let out a room to a festival guest. They will be able to go on claiming the relief as normal.
Senga Prior is a member of the Association of Taxation Technicians’ technical steering group