What is the Rent-a-Room Scheme?
The Rent-a-Room Scheme is a tax relief that lets you earn a set amount of tax-free income each year from letting out furnished accommodation in your own main home. It's aimed squarely at people taking in a lodger — someone sharing your home, typically with access to communal areas like the kitchen and bathroom — rather than landlords letting a separate, self-contained flat.
How much can you earn tax-free?
The Rent-a-Room allowance is £7,500 per tax year. If you share the letting income with someone else — most commonly a partner or joint owner who also receives some of the rent — the allowance is halved to £3,750 each, regardless of how the income is actually split between you.
| Situation | Tax-free allowance |
|---|---|
| Sole recipient of the rental income | £7,500 per year |
| Income shared with another person (e.g. spouse/partner) | £3,750 each per year |
This figure covers gross rental income, including any amounts a lodger pays towards bills, meals or laundry if those are bundled into the rent, not just the "clean" rent figure.
Automatic exemption vs electing in
If your total gross receipts from letting a room are below the relevant threshold, the exemption applies automatically — you do not need to do anything or even tell HMRC, unless you already complete a Self Assessment return for other reasons, in which case there are specific boxes to complete.
If your receipts exceed the threshold, you have a choice: you can either elect for the Rent-a-Room Scheme and pay tax only on the amount above the allowance (with no deduction for expenses), or opt to be taxed under the normal property income rules instead, deducting actual allowable expenses (such as a share of utility bills, wear and tear, or repairs) from the full rental income. Which is more tax-efficient depends on how high your expenses are relative to your income — if your costs are low, Rent-a-Room is usually simpler and more generous; if you have substantial allowable expenses, the normal rules might produce a lower tax bill.
Rent-a-Room vs the Property Allowance
Many people are unaware there is a separate, smaller £1,000 Property Allowance available for other types of property income, such as letting a driveway, garage, or a wholly separate self-contained annexe. You cannot use the Rent-a-Room Scheme and the Property Allowance on the same source of income at the same time — you must choose one basis for a given letting. For a lodger in your main home, Rent-a-Room is almost always the more valuable option given its far higher threshold.
What counts as your "main home"
The scheme only applies to letting furnished accommodation within the home that is your main residence for at least part of the period in question — it doesn't apply to a second property, a buy-to-let, or a self-contained annexe with its own entrance and no shared living space, which would instead be treated as an ordinary rental business.
Effects beyond tax: mortgage, insurance and benefits
Taking in a lodger can have knock-on effects worth checking before you start. Many residential mortgage agreements require you to notify or get consent from your lender before taking in a lodger, and standard home insurance policies may need to be updated, as a lodger is generally treated differently from a family member living with you. If you or your household receive means-tested benefits or tax credits, letting income (even if tax-free under Rent-a-Room) may still need to be declared and could affect entitlement, so it's worth checking the specific rules that apply to your benefit.
Key takeaways
- The Rent-a-Room Scheme gives up to £7,500 a year tax-free for letting a furnished room in your own main home (£3,750 if income is shared).
- It's designed for lodgers living within your home, not for separate self-contained lettings.
- Below the threshold, the exemption is automatic; above it, you can elect into Rent-a-Room or use normal property income rules with expense deductions instead.
- You cannot combine Rent-a-Room with the separate £1,000 Property Allowance for the same income.
- Check your mortgage terms and home insurance before taking in a lodger, and consider any effect on means-tested benefits.