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Irish Examiner
28-07-2025
- Business
- Irish Examiner
Rent-a-Room explainer: How to earn up to €14k tax-free by opening your home to a lodger
The Rent-a-Room scheme (RAR), launched way back in 2001 and now approved by the Government until 2027, has been described as everything from a band-aid on the housing crisis to a vital lifesaver for desperate house-hunters, pensioners, separated individuals and struggling students. For anyone with a spare room or an independent living space structurally attached to their home, it's a very attractive prospect if the environment is right, you are temperamentally suited to the arrangement and open to a lifestyle change. Renting out a room or suitable accommodation to a private individual using RAR can deliver a tax credit of up to €14,000 per year (not including for PRSI and Universal Social Charges). Broken down into a few monthly lets or used year long, this figure is well in excess of the price of all student housing over the 38 to 40 weeks of a typical academic year in college. RAR is very useful for professionals working away from home for a longer contract, who want to cut the weekly commute. For tax purposes, Revenue demands that the home you're sharing must be your primary residence, and the renter must occupy the room or unit within the house for 28 consecutive days. Occasional accommodation falls under short-term lets for tax purposes, but four- to five-day occupancy for properly set, shorter or longer periods is acceptable under RAR once a proper licence is in place. If you're interested in pledging a place in your home for a refugee, the Accommodation Recognition Payment (ARP) of €600 per month for hosting a refugee recognised under the EU Temporary Protection Directive, can be combined with RAR if you meet the criteria for both schemes. ARP is only set to continue until March 2026. Using RAR with a licence agreement as the tenant, you can apply for a valuable rent tax credit from Revenue (including renting RAR accommodation for a child on an approved educational course). As a homeowner or leaseholder, there are lesser-known details to the scheme that might make it interesting for anyone from a retiree to a young family to carefully consider as part of their financial planning. For instance, although you cannot rent out your space under the scheme to your spouse, civil partner or partner, son or daughter, extended family members are not totally precluded. You could use the scheme for a grandchild, nephew, niece or cousin. Martina Hennessy, managing director at Doddl: 'Mortgage lenders do not take this potential income into account as it is non-taxable and is not deemed to be earned income for mortgage assessment.' Since December 2023, the scheme has also included the opportunity for local authority tenants to rent out a room to a student or to someone getting a housing assistance payment. Once approved by your local authority, the tax credit of €14,000 will be honoured by Revenue, and this will not affect most means-tested social welfare payments. This €14,000 ceiling set by Revenue (before tax kicks in) includes charges for laundry, utilities, and foodstuffs. As a local authority tenant renting to a student, Citizens Information set out the parameters here (both must make an application for every academic year), and the authority will review the rent you are paying as a local authority tenant: As a landlord You must not have any rent arrears, or if there are arrears, you must have a payment plan in place You must be complying with the terms and conditions of your tenancy agreement with the local authority Your local authority home must be in good condition and be well-maintained Your home must not become overcrowded if you rent a room to a student As a student, you must Be a registered full-time student at a higher education institution. You must provide proof of this Be over 18 Not be closely related to the local authority tenant you are renting from Not have engaged in anti-social behaviour Be tax-compliant Tenants and homeowners It's not well understood that RAR is open to tenants as well as private homeowners. If your landlord is agreeable, you can sublet under the scheme, following the same guidelines as if you owned the house or apartment. Obviously, don't even approach this sort of tenancy before getting full permission in writing from the owner or property management team. Could an RAR-operating home help to improve a mortgage? Martina Hennessy, founder and CEO of digital mortgage brokers says: 'Mortgage lenders do not take this potential income into account as it is non-taxable and is not deemed to be earned income for mortgage assessment. While you may have the ability to rent a room, a mortgage lender will not allow this income to be included to increase mortgage lending under a home loan mortgage application. Rental income can only be taken into the mortgage assessment for a buy-to-let property. If you have a self-contained unit that was originally part of the property, there are a couple of extra things to know that could protect your position, but which may give someone looking for accommodation pause. First of all, the same rights and responsibilities will apply as if you were letting to someone under a normal lease (Residential Tenancies Act 2004), and the standards for the property must meet a set baseline. You must also register the rental with the Residential Tenancies Board (RTB). On the flip side, those signing up to the RAR mechanism can opt out of a typical 'right-to-stay' requirement covering a designated period of time. As a landlord, you must inform your potential renter in writing that you're opting out of this clause so that they are fully aware of what they are signing up for. On the other hand, renting out a spare room in the house itself, as a tenant, there's no minimum standard to be met, and no protection under the Residential Tenancies Act. Many householders within the vicinity of a place of further education or, for instance, a hospital, find the licence-based renting agreement perfect for their situation, as renting out just a room, there's more flexibility and no binding lease. This can lead to a happy win-win situation that continues for years, or weekly misery for a vulnerable tenant finally pushed out under 'reasonable notice.' Students renting under the RAR scheme can be pressured to absent themselves over weekends, even where this is not actually designated in the licence (it can be). Self-contained but not structurally separated areas of your home including basements, converted attics and garages can be used for the Rent a Room scheme but there are added conditions. File picture Opening up your home so intimately to a stranger is not something to be taken lightly. The scheme focuses on spare bedrooms and self-contained annexes like converted garages and attics that are fully part of the house. Detached buildings currently do not qualify for the Rent-a-Room scheme. As a landlord and tenant, you're a bit more present in each other's lives. In some cases, the arrangement will include sharing living spaces, the kitchen and even the bathroom, depending on the layout of your property — a classic 'digs' arrangement. Some empty-nesters taking on younger renters will enjoy the new refreshing energy brought back to a larger, rattling home where the chicks have flown. That said, life is about compromise, and you cannot expect a grown adult to tiptoe around your house in monastic quiet, even five days a week. It's hard to preserve the typical stipulation of 'undisturbed occupancy' at every turn. Older adult tenants may prove to be just as challenging as a first-year engineering student. As a landlord and renter, ensure you work out the house rules in a proper licence agreement that you will both sign. This will include (at least) what length of reasonable notice there is if the arrangement does not work out, expectations regarding utility bill payments, noise, deposit arrangements, house rules covering things like overnight guests and cleaning, and a set rental payment schedule. There's a good guide here. When renting any room, choose your home and prospective share carefully. Pushed up just that bit closer to the property owner or lease holder, things could prove extremely awkward and stressful. There's an excellent page outlining your rights when sharing a home online at Read More Medical card assessment to disregard €14k-rent-a room scheme income
Irish Times
05-06-2025
- Business
- Irish Times
ECB cuts interest rates by quarter percentage point
The European Central Bank (ECB) cut its key deposit rate by a quarter of a percentage point to 2 per cent on Thursday, leaving it at half the level of a year ago when its governing council started to reduce the cost of borrowing. The bank also reduced its main lending rate, to which tracker mortgages are linked, by a quarter of a point to 2.15 per cent, as inflation continued to ease. 'The immediate beneficiaries of an ECB cut are the over 120,000 mortgage holders with tracker rates,' said Martina Hennessy, managing director of mortgage brokers, 'The average tracker mortgage holder with a margin of 1.1 per cent to ECB, will now see savings of €52 per month for every €100,000 owed over a 20-year term.' Economists widely expect the ECB to reduce its deposit rate again in September, to 1.75 per cent, at the lower end of what the bank sees as a neutral rate that neither stimulates or restricts the economy. READ MORE By that stage the outcome of trade negotiations between the EU and US should be known, allowing a team of central bank staff, led by chief economist Philip Lane, to assess the impact of any future tariffs on inflation. [ Tariff uncertainty makes ECB decision on interest rates easy Opens in new window ] ECB staff lowered their average euro-zone inflation forecasts for this year and next by 0.3 percentage points, to 2 per cent and 1.6 per cent, respectively. They see economic growth, measured as real gross domestic product (GDP) expanding by 0.9 per cent in 2025 and 1.1 per cent in 2026. Staff also said that in a scenario where trade tensions escalated in the coming months, it would result in inflation and economic growth would likely come in 'below the baseline projections'. 'By contrast, if trade tensions were resolved with a benign outcome, growth and, to a lesser extent, inflation would be higher than in the baseline projections,' the ECB said. While some economists are of the view that the ECB could cut again later on the year, to leave the main rate at 1.5 per cent, members of the governing council have clearly signalled in recent times that they're almost done with lowering borrowing costs. Consumer prices rose 1.9 per cent from a year ago in May, down from 2.2 per cent in April, data published on Tuesday showed. Financial markets had expected a figure of about 2 per cent, which is the ECB's official inflation target. The rate had peaked at 10.6 per cent in late 2022, as Russia's invasion of Ukraine and the subsequent energy crisis compounded the inflationary effect of global supply chain bottlenecks stemming from the Covid-19 pandemic. 'Most measures of underlying inflation suggest that inflation will settle at around the governing council's 2 per cent medium-term target on a sustained basis,' the ECB said. The governing council 'will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance', it said, adding that it is not pre-committing to a particular rate path.
