Arthur rents a room in his sole residence and will receive €14,500 in rent. What amount of Arthur's rental income is liable to income tax?

• A. €14,500
• B. Nil
• C. €14,500 less expenses
• D. €500

Answer: (A)

Rent-a-Room relief lets you earn a room in your own home tax-free up to a set threshold. In this context, that threshold is 14,000 euros per year. Arthur rents out a room for 14,500 euros, so only the amount above the threshold is taxable: 14,500 minus 14,000 equals 500 euros. That 500 euros is the portion liable to income tax, taxed at Arthur’s marginal rate. Expenses aren’t deducted under this scheme, so you simply apply the threshold to the gross rent. If the rent were 14,000 or less, there would be no rental income taxed.