The Rent a Room scheme lets you earn up to £7,500 tax-free per year from renting a furnished room in your home to a lodger. The scheme applies automatically if you qualify—you don't need to register or claim it. If your rental income exceeds £7,500, you can choose to either deduct the £7,500 allowance or claim actual expenses, whichever gives you the lower tax bill.
This guide explains how the scheme works, who qualifies, and when you might want to opt out.
How the Rent a Room Scheme Works
The Basics
| Aspect | Details | |--------|---------| | Tax-free allowance | £7,500 per year | | Shared with someone | £3,750 each | | What it covers | Rent + bills + services | | Registration required | No | | Reporting required | No (if under £7,500) |
Automatic Application
If you meet the conditions, the scheme applies automatically:
- You don't need to register
- You don't need to file a tax return (if under £7,500)
- You don't need to tell HMRC anything
Only take action if:
- Income exceeds £7,500, or
- You want to opt out and claim expenses instead
Who Qualifies
Eligibility Requirements
| Requirement | Detail | |-------------|--------| | Your home | Must be your main residence | | Furnished room | Room must be furnished | | In your home | Not a separate building | | Residential let | Lodger lives there |
Who Can Use It
| Situation | Qualifies? | |-----------|-----------| | Homeowner letting spare room | Yes | | Tenant subletting (with permission) | Yes | | Live-in landlord | Yes | | Letting unfurnished room | No | | Letting separate building/annex | No | | Letting while away (not your home) | No |
Main Residence Requirement
The property must be where you normally live:
| Scenario | Qualifies? | |----------|-----------| | Your primary home | Yes | | Second home | No | | Holiday home | No | | Buy-to-let property | No | | Home you've moved out of | No |
What Counts as Income
Included in the £7,500
| Income Type | Included? | |-------------|----------| | Rent payments | Yes | | Contribution to bills | Yes | | Payment for meals provided | Yes | | Payment for laundry service | Yes | | Payment for cleaning | Yes |
Not Included
| Income Type | Included? | |-------------|----------| | Deposits (refundable) | No | | Rent from separate property | No | | Business use payments | No (different rules) |
Shared Ownership
Splitting the Allowance
If you share the income with someone else:
| Situation | Your Allowance | |-----------|---------------| | You receive all income | £7,500 | | Shared with spouse/partner | £3,750 each | | Shared with co-owner | £3,750 each |
How Splitting Works
Example: Married Couple
| Partner | Rent Received | Allowance | Taxable | |---------|---------------|-----------|---------| | Partner A | £4,000 | £3,750 | £250 | | Partner B | £4,000 | £3,750 | £250 | | Total | £8,000 | £7,500 | £500 |
Even though total income is £8,000, the combined allowance is still £7,500.
Income Under £7,500
No Action Required
If your rental income is £7,500 or less:
| Action | Required? | |--------|-----------| | Register with HMRC | No | | File Self Assessment | No | | Pay Income Tax | No | | Keep records | Recommended |
The scheme applies automatically—you keep all the income tax-free.
Example: Under the Threshold
Sarah lets her spare room:
| Item | Amount | |------|--------| | Monthly rent | £550 | | Annual income | £6,600 | | Rent a Room allowance | £7,500 | | Tax to pay | £0 |
Sarah doesn't need to do anything. The income is tax-free.
Income Over £7,500
Two Options
If income exceeds £7,500, you must:
- File a Self Assessment return, and
- Choose a calculation method
| Option | How It Works | |--------|--------------| | Option A: Use the allowance | Income − £7,500 = taxable | | Option B: Claim expenses | Income − actual expenses = taxable |
Option A: Deduct the Allowance
Simple calculation:
| Item | Amount | |------|--------| | Rental income | £9,000 | | Less: Rent a Room allowance | −£7,500 | | Taxable income | £1,500 |
Use this if your expenses are less than £7,500.
Option B: Claim Actual Expenses
Expense-based calculation:
| Item | Amount | |------|--------| | Rental income | £9,000 | | Less: Expenses | −£2,000 | | Taxable income | £7,000 |
In this example, the allowance (Option A) gives a lower taxable amount—use that.
Which Option to Choose
| Your Expenses | Best Option | |---------------|-------------| | Under £7,500 | Use the allowance | | Over £7,500 | Claim expenses |
Key point: You cannot claim both. It's the allowance OR expenses, not both.
Opting Out of the Scheme
When to Opt Out
You might want to opt out if:
| Reason | Example | |--------|---------| | High expenses | Significant repairs or improvements | | Creating a loss | Expenses exceed income | | Carrying losses forward | Building tax relief for future |
How to Opt Out
| Method | How | |--------|-----| | File Self Assessment | Report income and expenses | | Complete property pages | SA105 supplementary pages | | Elect to opt out | Tick the opt-out box |
Opting Back In
If you opted out, you can opt back in for future tax years. Notify HMRC within 12 months of the end of the tax year you want to opt in for.
Rent a Room and Other Property Income
Interaction with BTL
The Rent a Room scheme is separate from other rental income:
| Income Source | Treatment | |---------------|-----------| | Lodger in your home | Rent a Room scheme | | Buy-to-let property | Normal property income |
You can use both simultaneously for different properties.
Example: Mixed Portfolio
| Property | Income | Treatment | |----------|--------|-----------| | Spare room (main home) | £6,000 | Rent a Room (tax-free) | | Buy-to-let flat | £12,000 | Property income (taxable) |
The schemes don't interact—calculate each separately.
Rent a Room and Airbnb
Short-Term Letting
The Rent a Room scheme can apply to Airbnb:
| Airbnb Situation | Qualifies? | |------------------|-----------| | Letting a room in your home | Yes | | Letting whole home while away | No | | Letting separate property | No |
Example: Airbnb Room
James lets his spare room on Airbnb:
| Item | Amount | |------|--------| | 60 nights at £80 | £4,800 | | Within Rent a Room limit | Yes | | Tax to pay | £0 |
Learn more: Airbnb Tax UK
Trading Allowance vs Rent a Room
Which Applies?
| Allowance | For | Amount | |-----------|-----|--------| | Trading Allowance | Self-employment income | £1,000 | | Property Allowance | Rental income (not main home) | £1,000 | | Rent a Room | Lodger in main home | £7,500 |
The Rent a Room scheme is separate from and more generous than the Property Allowance.
Can You Use Multiple Allowances?
You can use both the Trading Allowance (for self-employment) and Rent a Room (for lodger income)—they cover different income types.
Record Keeping
Even If Tax-Free
Keep records even if income is under £7,500:
| Record | Purpose | |--------|---------| | Rental agreement | Proof of arrangement | | Bank statements | Evidence of payments | | Dates of letting | Duration of tenancy |
Keep for 6 years in case HMRC queries your tax affairs.
If Filing Self Assessment
| Record | Purpose | |--------|---------| | All income received | Total for tax year | | Expenses (if claiming) | Deductions from income | | Calculation choice | Which method you used |
Common Rent a Room Questions
Does Council Tax Change?
Having a lodger doesn't usually affect Council Tax:
| Situation | Council Tax | |-----------|------------| | Lodger who isn't a joint tenant | No change | | Sub-tenant with exclusive use | May change | | Check with your council | Always advisable |
What About Benefits?
Rental income may affect means-tested benefits:
| Benefit | Impact | |---------|--------| | Universal Credit | Income may affect entitlement | | Housing Benefit | Income may affect entitlement | | Tax Credits | Income may affect calculation |
Seek advice if you receive benefits before taking a lodger.
Does It Affect Mortgage?
Check your mortgage terms:
| Mortgage Type | Likely Position | |---------------|-----------------| | Standard residential | Often permits lodger | | Buy-to-let | Lodger arrangements vary | | Always check | Notify lender if required |
Some mortgages require you to inform the lender.
Insurance Implications
Notify your insurer:
| Insurance | Action | |-----------|--------| | Buildings | Inform of lodger | | Contents | Update for lodger's possessions | | Landlord insurance | May be required |
Non-disclosure could invalidate claims.
Furnished Holiday Lettings
Rent a Room doesn't apply to furnished holiday lettings (FHL):
| Type | Scheme | |------|--------| | Lodger in main home | Rent a Room (£7,500) | | Holiday let (whole property) | FHL rules | | Room in home for tourists | Rent a Room may apply |
FHL has different rules and tax advantages. Learn more at HMRC's guidance on furnished holiday lettings.
Making Tax Digital
Does MTD Apply?
MTD for Income Tax applies based on your qualifying income:
| Your Income | MTD Applies? | |-------------|-------------| | Only Rent a Room (under £7,500) | No | | Rent a Room + other self-employment over £50k | Yes (from April 2026) | | Rent a Room + other property income over £50k | Yes (from April 2026) |
If Rent a Room is your only income and it's under £7,500, MTD won't affect you.
Summary: Rent a Room Checklist
Do You Qualify?
- [ ] Letting a furnished room in your main home
- [ ] You live there as your residence
- [ ] Room is part of the main building
Under £7,500 Income
- [ ] No action needed
- [ ] Scheme applies automatically
- [ ] Keep records anyway
Over £7,500 Income
- [ ] File Self Assessment
- [ ] Choose: allowance OR expenses
- [ ] Report on SA105 property pages
Key Points
| Threshold | Treatment | |-----------|-----------| | Under £7,500 | Tax-free, no reporting | | Over £7,500 | File return, choose method | | Shared income | £3,750 each |
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