What Rent a Room is
The Rent a Room scheme lets you receive up to £7,500 a year from letting furnished accommodation in your main home without paying tax on it. It applies whether you own your home or rent it, as long as your landlord allows lodgers.
The limit applies to the tax year, from 6 April to 5 April, and is not reduced if you only let a room for part of the year.
What qualifies
- Furnished rooms in your only or main home, let to a lodger.
- Bed and breakfast or guest house income from rooms in your home.
- Short stays, such as letting a spare room to holiday guests, if you live there at the same time.
It does not cover:
- a separate, self-contained flat let unfurnished;
- a home you do not live in;
- rooms used as an office or for a business.
You must live in the home for at least part of the time the room is let in each tax year.
What counts towards the limit
The £7,500 is a limit on gross receipts, not profit. It includes the rent and anything you charge for extras, such as meals, cleaning, laundry, or a share of energy and broadband bills.
- Rent£650 × 12£7,800
- Bills£50 × 12£600
That is over the limit, even though the rent alone is only £300 over.
Under the limit
If your receipts are £7,500 or less, the relief is automatic. You pay no tax on the income and you do not need to tell HMRC or fill in a tax return for it.
When you might opt out
If your costs are higher than your receipts, you make a loss. You can opt out of the scheme for that year to record the loss and carry it forward against future rental profits.
Over the limit: two methods
If your receipts are over £7,500, you must tell HMRC and choose one of two methods each year:
- Taxable amount
- Receipts above £7,500
- Expenses
- Cannot be claimed
- Best when
- Your costs are under £7,500
- Taxable amount
- Receipts minus expenses
- Expenses
- Actual costs claimed
- Best when
- Your costs are over £7,500
The profit is added to your other income and taxed at your normal Income Tax rates. There is no National Insurance on it.
Examples
| Receipts | Expenses | Other income | Rent a Room tax | Normal method tax |
|---|---|---|---|---|
| £6,000 | £0 | £30,000 | £0 | £1,200 |
| £9,000 | £1,000 | £30,000 | £300 | £1,600 |
| £9,000 | £1,000 | £60,000 | £600 | £3,200 |
| £12,000 | £2,000 | £30,000 | £900 | £2,000 |
| £12,000 | £9,000 | £30,000 | £900 | £600 |
In most cases the Rent a Room method wins, because few lodger arrangements cost more than £7,500 a year to run. The last row shows the exception: with £9,000 of costs, the normal method saves £300.
Telling HMRC
- Over £7,500Register for Self Assessment
By 5 October after the end of the tax year in which you first go over the limit.
- Tax returnChoose your method
Tick the Rent a Room box to use the scheme, or report income and expenses for the normal method.
- 31 JanuaryPay the tax
Online returns and payment are due by 31 January after the tax year.
Practical checks before taking a lodger
- Mortgage: tell your lender. Most allow a lodger, but some need consent.
- Home insurance: tell your insurer, as a lodger can affect your cover.
- Tenancy: if you rent, check your tenancy allows a lodger and get your landlord's permission.
- Right to rent: in England you must check that an adult lodger has the right to rent.
- Council tax: a lodger who lives with you as their main home ends any single person discount.
- Benefits: lodger income can affect means-tested benefits; check before you start.
- Agreement: a simple written lodger agreement setting out rent, notice and house rules avoids disputes.
Lodger or tenant?
A lodger lives in your home and shares facilities such as the kitchen or bathroom with you. They have fewer rights than a tenant: they are usually an "excluded occupier", so you can end the arrangement with reasonable notice, often the length of the rent period, without a court order.
If you move out and let the whole home, or let a self-contained part with its own front door and facilities, the person is more likely to be a tenant with full tenancy rights. That is not covered by Rent a Room and is taxed as normal rental income.
Example: a lodger for part of the year
Priya lets her spare room for £700 a month from October to March, six months of the tax year. She earns £32,000 from her job.
- Rent received£700 × 6£4,200
- Rent a Room limit£7,500
Her receipts are under the limit, so there is nothing to pay or report. If the lodger stayed all year, she would receive £8,400 and pay tax on £900 under the scheme: £180 at the basic rate.