Rent a Room Relief: GBP 7,500 Tax-Free Lodger Income in 2026/27

Taking in a lodger is one of the most straightforward ways to generate extra income in the UK -- and thanks to the Rent a Room scheme, you can receive up to GBP 7,500 per year completely tax-free. In 2026/27 the threshold remains unchanged, making it a compelling option for homeowners and tenants alike who have a spare furnished room.

What Is the Rent a Room Scheme?

The Rent a Room scheme is a government relief that lets you earn a set amount of gross income from letting furnished accommodation in your own home without paying any income tax on it. "Gross income" means your total receipts from the lodger before deducting any expenses.

The scheme is available to:

• Owner-occupiers letting a furnished room or rooms to a lodger
• Tenants who sub-let part of their rented home (provided the tenancy agreement permits it)

The property must be your main residence -- you must actually live there. You cannot use the scheme for a buy-to-let property you do not live in.

The GBP 7,500 Threshold for 2026/27

The annual exempt amount is GBP 7,500 gross. As long as your total receipts from lodgers in the tax year stay at or below this figure, no tax is due and -- crucially -- you may not need to complete a Self Assessment return at all.

If your receipts exceed GBP 7,500, you have two calculation options (see below).

Joint Landlords: GBP 3,750 Each

If you share the property with another person who also receives income from the lodger -- for example, a spouse or co-owner -- the threshold is halved to GBP 3,750 each. Both of you must report the income separately; neither can claim the full GBP 7,500.

The Furnished Requirement

This is a common sticking point: the room or rooms you let must be furnished. HMRC does not define "furnished" in precise terms, but in practice this means the lodger should be able to live there without needing to supply their own furniture -- a bed, storage and basic furnishings are expected. Simply letting an empty room does not qualify.

Receipts you can include within your GBP 7,500 threshold:

• Rent
• Payments for meals, laundry or cleaning services provided to the lodger
• Any other services you supply as part of the arrangement

Airbnb and Short-Let Platforms

You can use Rent a Room relief with Airbnb or similar platforms -- but only if the letting is of furnished rooms in your main home and you remain living there during the guests' stays.

If you leave your home entirely during a short let (for example, you go on holiday while guests use the whole property), that does not qualify. HMRC considers this a different type of property letting, subject to normal property income rules and potentially the separate GBP 1,000 property allowance.

Two Calculation Methods When You Exceed GBP 7,500

If your gross receipts go above GBP 7,500, you have a choice each year:

Method 1: Rent a Room Basis

Taxable profit = Gross receipts minus GBP 7,500. You cannot deduct any expenses -- the threshold replaces them.

Method 2: Actual Expenses Basis

Taxable profit = Gross receipts minus actual allowable expenses (mortgage interest element, repairs, a proportion of utilities, etc.). You would then pay tax on the resulting profit at your marginal rate.

Which should you choose? If your allowable expenses are low, Method 1 usually produces less tax. If you have high expenses -- or if your receipts are only slightly above the threshold -- Method 2 may reduce your bill. You can switch between methods each year, but you must notify HMRC via Self Assessment by the filing deadline (31 January following the end of the tax year).

What Happens If You Leave Your Home?

The scheme requires the property to be your main residence at the time of the letting. If you temporarily move out -- say, you go travelling for three months and rent your room during that period -- those receipts probably fall outside the scheme because you are not resident in the property.

However, short absences (weekends away, holidays) while the lodger is in residence are generally fine. The key test is whether the property genuinely remains your home throughout the letting period.

Tax and National Insurance on Lodger Income

Lodger income under the GBP 7,500 threshold is not subject to National Insurance contributions, and it does not affect your Personal Allowance calculation for income tax purposes. It sits outside the normal income tax computation entirely.

How to Report It

• Below GBP 7,500, no other Self Assessment income: HMRC applies the relief automatically -- no action needed.
• Below GBP 7,500, but you already file Self Assessment: Include the income in your return and tick the Rent a Room box; no tax will be due.
• Above GBP 7,500: You must complete a Self Assessment return and declare the excess using your chosen method.

A Worked Example

Sarah lives alone in a three-bedroom house in Bristol. She rents out two furnished rooms to lodgers for GBP 600/month each, giving gross annual receipts of GBP 14,400.

• Method 1: Taxable amount = GBP 14,400 - GBP 7,500 = GBP 6,900. At the basic rate (20%), tax due = GBP 1,380.
• Method 2: Her actual allowable expenses (proportion of utilities, broadband, wear and tear) total GBP 2,200. Taxable amount = GBP 14,400 - GBP 2,200 = GBP 12,200. Tax due = GBP 2,440.

Method 1 saves Sarah GBP 1,060 in this case.

Is It Worth Taking In a Lodger?

With rents rising across the UK, a lodger can generate meaningful income with relatively low effort -- and the GBP 7,500 relief means many people pay no tax at all. Run the numbers against your mortgage costs, the impact on your lifestyle and any tenancy restrictions before proceeding. Our Rent a Room calculator can show you the after-tax income under both methods in seconds.