How does the Rent a Room relief work?

Full answer

The Rent a Room scheme is a government relief that allows UK homeowners (and some tenants) to earn tax-free income from letting a furnished room in their main home. **2026/27 threshold:** £7,500 gross income per year (£3,750 if you share the letting income with a joint owner/partner) **Main conditions:** 1. The room must be **furnished**. 2. It must be in your **main home** (your principal private residence). 3. You (or your spouse/partner) must **live in the property** — you cannot rent it out entirely. 4. The relief applies to **lodgers** (someone who rents a room while you share the house), not to rentals of a separate self-contained flat within your home (though this is a grey area — HMRC guidance refers to the property being "shared"). **How it works:** - If gross receipts are **below £7,500**: the income is automatically exempt from tax — you do not need to report it on a Self Assessment return or register with HMRC. - If gross receipts **exceed £7,500**: you can either: - Pay tax on (gross receipts − £7,500) at your marginal rate (simplest option) - Opt out of the scheme and instead deduct actual allowable expenses (only worthwhile if expenses exceed £7,500) **Opting out:** Election to opt out of the scheme must be made by the 31 January Self Assessment deadline for the tax year concerned. **Subletting (tenants):** Tenants can also use Rent a Room relief if their lease permits subletting — but check your tenancy agreement first, as subletting without permission may breach the agreement. **Student let vs lodger:** There is no restriction on renting to a student — the room simply needs to be furnished and in your main home.

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