Guide · Property & Tax
UK Rent a Room Scheme — £7,500 Tax-Free Allowance Explained
The Rent a Room scheme lets UK homeowners and tenants earn up to £7,500 a year tax-free from letting a furnished room in their main residence — halved to £3,750 each if the income is split with another person. It only applies to a furnished room in a property that is your only or main home, not a buy-to-let, not an unfurnished room and not a separate self-contained annex. The £7,500 threshold has been frozen since 6 April 2016 (raised from £4,250), and no Budget since has announced an uplift, so plan on that figure for the foreseeable future.
- £7,500/year tax-free (£3,750 each if shared with another person).
- Furnished room in your main home only — owner-occupier or tenant (with permission).
- Under £7,500 → automatic, no Self Assessment needed just for this.
- Over £7,500 → choose £7,500 fixed deduction or deduct actual expenses. Frozen since 2016.
Who qualifies
Rent a Room is the relief defined in ITTOIA 2005, Part 7, Chapter 1. To use it, all of the following must be true for the period of letting:
- You let furnished accommodation — bare-walls unfurnished lettings do not qualify.
- The accommodation is in your only or main residence. You must actually live there during the letting.
- You are an individual — partnerships of individuals can use it but companies cannot.
- If you are a tenant, your own lease must permit sub-letting (most ASTs require written landlord consent).
- Provision of some board (breakfast, meals, cleaning) is allowed and still counts.
It does not cover:
- A self-contained annex with its own entrance and facilities (treated as separate property letting).
- Unfurnished rooms.
- Second homes, holiday homes or buy-to-let flats where you do not live.
- Letting the whole property while you are away (that is furnished holiday lettings or property income).
- Premises used as an office only — the relief is for residential accommodation.
How the allowance works — two methods
Once you decide you qualify, the maths splits in two depending on whether gross receipts are below or above the threshold. "Gross receipts" means everything you charge the lodger: rent, meals, cleaning, bills paid by the lodger — before any of your own expenses.
Method A — receipts ≤ £7,500
Relief is automatic. No tax is due on the income, you do not need to register for Self Assessment just for this, and you do not need to inform HMRC. If you already file SA for another reason (self-employment, high income, dividends), you simply do not enter the lodger income on the return.
Method B — receipts > £7,500
You must file Self Assessment and choose, each year, between:
- Fixed £7,500 deduction. Pay tax on gross receipts minus £7,500. Ignore your actual expenses entirely. This is almost always better if your real expenses are low.
- Actual basis. Pay tax on profit = gross receipts − allowable expenses (utilities, cleaning, repairs, insurance attributable to the let, agent fees, wear-and-tear-type costs). Use this if your real costs exceed £7,500.
You can switch methods each tax year. To opt out of the relief entirely (which sometimes makes sense if you want to claim a loss), file form for opt-out within the relevant time limit — typically one year from 31 January after the tax year.
Joint ownership — £3,750 each, not £7,500
If two or more people receive the rental income — whether spouses, civil partners, joint owners or two unrelated landlords — the £7,500 limit is halved to £3,750 each. It does not matter what proportion they own or receive: the statute simply halves it. The number of recipients does not reduce it further — three joint owners still each get £3,750.
Note: the spouse/civil partner default 50/50 split and form 17 election that apply to ordinary rental income do not override this halving. Rent a Room has its own statutory split rule.
Worked examples
Scenario A — £6,000 annual lodger income, sole owner
Gross receipts £6,000 are below the £7,500 threshold. Relief is automatic, no tax due, no Self Assessment required for this income. Done.
Scenario B — £9,000 income, £500 expenses, sole owner, basic-rate taxpayer
| Method | Taxable amount | Tax @ 20% |
|---|---|---|
| Fixed £7,500 deduction | £9,000 − £7,500 = £1,500 | £300 |
| Actual expenses | £9,000 − £500 = £8,500 | £1,700 |
Fixed deduction wins by £1,400. Almost everyone in this scenario should tick the Rent a Room box.
Scenario C — £12,000 Airbnb-style income, £4,000 expenses, sole owner, basic-rate taxpayer
| Method | Taxable amount | Tax @ 20% |
|---|---|---|
| Fixed £7,500 deduction | £12,000 − £7,500 = £4,500 | £900 |
| Actual expenses | £12,000 − £4,000 = £8,000 | £1,600 |
Even with £4,000 of real costs, the fixed deduction still wins by £700. It only flips when actual expenses exceed £7,500.
Scenario D — Joint owners, £6,000 income (£3,000 each)
Each owner's share (£3,000) is below their halved £3,750 threshold. Relief is automatic for both, no tax, no Self Assessment. If the household income had been £8,000 (£4,000 each), each owner would be £250 over their threshold and would need to file — small absolute number but real filing obligation.
Capital Gains Tax — does a lodger affect Private Residence Relief?
Generally no. HMRC's long-standing position (HMRC manual CG64702) is that a single lodger sharing kitchen, bathroom and living areas does not disturb full Private Residence Relief on the eventual sale of the home. The room is not exclusively used for business, and the lodger is treated as living as part of the household.
The position changes if you start running what looks like a guesthouse or B&B: multiple paying guests rotating through, exclusive business use of part of the building, business rates paid, or commercial signage. In those cases part of the gain on sale may fall outside PPR and become chargeable. One lodger, no — a small hotel, yes.
Council Tax single-person discount
Yes, a resident lodger removes the 25% single-person discount. Council Tax discounts are based on the number of adults treated as resident, and a paying lodger counts as a second adult resident. You must tell your council within 21 days of the change; failing to do so is a civil penalty offence. Children, full-time students and certain other disregarded persons do not reset the discount.
Effect on benefits
- Universal Credit: lodger income (whether from a boarder or a sub-tenant under Rent a Room) is fully disregarded for UC calculations. You do not lose UC because a lodger pays you £500 a month.
- Housing Benefit (legacy): similar treatment — a fixed amount of board-and-lodging income is disregarded, and the remainder partially.
- Bedroom tax / under-occupancy: if you are a social housing tenant, taking in a lodger can remove the spare-room reduction (the room is no longer spare).
Mortgage, insurance and legal checklist
- Mortgage lender: notify them. Standard residential mortgages require consent for a paying lodger; consent is usually granted at no extra cost.
- Buildings & contents insurance: standard home policies often exclude paying guests. You typically need a landlord or resident landlord policy variant.
- Gas safety: if there are gas appliances, you must have an annual Gas Safe CP12 certificate and give a copy to the lodger.
- Smoke and CO alarms: the Smoke and Carbon Monoxide Alarm (England) Regulations 2015 (and equivalents in Scotland and Wales) require a working smoke alarm on each storey and a CO alarm in any room with a solid-fuel or gas appliance.
- EPC:not required when the lodger is an excluded occupier living in the resident landlord's own home (no separate tenancy granted).
- Deposit protection: not required either — a lodger is an excluded occupier, not an AST tenant, so the deposit protection schemes (TDS, DPS, MyDeposits) do not apply.
- Leasehold: if you own a leasehold flat, check the lease — many forbid sub-letting or require freeholder consent even for a lodger.
How to claim (when receipts exceed £7,500)
- Register for Self Assessment by 5 October following the end of the tax year if you have not filed before.
- Complete the SA105 UK property pages (or the SA200 short return if HMRC has invited you to use it).
- Tick the Rent a Room box and enter gross receipts.
- Choose method A (fixed £7,500 deduction) or method B (actual expenses). Enter the taxable amount accordingly.
- File and pay by 31 January after the tax year (online deadline; 31 October for paper).
- You can change method each year — re-pick whichever produces the lower taxable amount.
Frequently asked questions
- Can I claim Rent a Room relief if I rent the property myself (tenant)?
- Yes. The scheme is open to owner-occupiers and tenants alike, as long as the property is your main residence. Tenants must check their own lease — most assured shorthold tenancies forbid sub-letting without the landlord's written permission, and breaching that term can be grounds for eviction even if HMRC is happy.
- Does Airbnb income count for Rent a Room relief?
- Sometimes. HMRC accepts short-stay Airbnb-style lettings under Rent a Room provided the property remains your main home and the activity is not run on such a scale that it amounts to a trade (a guesthouse or B&B). Occasional weekends or single rooms while you live there usually qualify; whole-property lettings while you are away do not — those fall under furnished holiday lettings rules instead.
- What if I move out part-way through the tax year?
- The £7,500 allowance is an annual amount and is not pro-rated by HMRC in the legislation itself, but it only applies for the period the property was your main residence. Income earned after you cease living there falls outside Rent a Room and is taxed under normal property income rules.
- Do I have to live in the property at the same time as the lodger?
- Yes. The relief is built around the idea that you share your home. If you leave for an extended period (say, working abroad for a year) the property stops being your main residence and the relief stops applying for that period.
- Can my limited company use Rent a Room relief?
- No. Rent a Room is statutorily available to individuals only (ITTOIA 2005 Part 7 Chapter 1). A company letting out residential rooms is taxed under normal corporation tax property income rules.
- Will taking in a lodger affect my mortgage?
- Almost certainly you must notify your lender. Standard residential mortgage contracts require written consent to take in a paying lodger; most high-street lenders grant it without changing the rate, but failing to ask is a breach of contract. Consent-to-let is a different (more expensive) product used for whole-property letting and is not normally needed for a lodger.
- Is the £7,500 allowance going up?
- No announced change. The threshold was raised from £4,250 to £7,500 on 6 April 2016 and has been frozen at £7,500 ever since. Successive Budgets and Autumn Statements through to late 2025 have left it untouched, so plan on the current figure.