Rent a Room Scheme: Earn £7,500 Tax-Free from a Lodger (UK)

If you’ve got a spare room, the Rent a Room Scheme is one of the most generous tax breaks around — letting you earn up to £7,500 a year tax-free from a lodger. Here’s how it works and when it’s worth using.

What is the Rent a Room Scheme?

The Rent a Room Scheme lets you receive up to £7,500 per year tax-free from letting furnished accommodation in your own home. It’s designed to encourage people to take in lodgers, and it’s refreshingly simple: below the threshold, there’s nothing to report.

If two people share the income (say you and a partner), the allowance is halved to £3,750 each.

How it works

It depends on whether your rent is above or below £7,500:

• Below £7,500 gross? You’re automatically exempt — no tax, no Self Assessment, nothing to do.
• Above £7,500? You must file a Self Assessment return and choose between two methods:
  1. Pay tax on everything above £7,500 (ignoring actual expenses), or
  2. Pay tax on your actual profit (rent minus allowable expenses), without the £7,500 allowance

You pick whichever gives the lower tax bill. For most single-room lets with modest costs, Method 1 (the £7,500 allowance) wins.

Who can use it

You qualify if you:

• Let a furnished room in your main home
• Whether you own or rent (renters need the landlord’s permission)

It doesn’t apply to:

• Letting a whole property that you don’t live in (that’s normal landlord territory — see landlord tax)
• A home divided into separate self-contained flats
• Using the room as an office rather than living accommodation

Airbnb and short stays

Short-term lettings of a room in your own home — including via Airbnb — can qualify, as long as it’s a room in your main residence and not the entire property while you’re elsewhere. Letting a whole home, or a second property, falls outside the scheme.

When to opt out

Occasionally it’s better not to use the scheme. If your expenses are high relative to the rent — significant repairs, for example — paying tax on your actual (lower) profit might beat the £7,500 allowance. You can choose each year, so it’s worth a quick check if your costs are unusual. Our rental income tax calculator helps you compare.

A simple, valuable break

The Rent a Room Scheme is one of the easiest tax savings to claim — automatic, generous, and ideal if you’ve got a spare room. If your lodger income is above £7,500, or you also let other property, our accountants for landlords make sure you use the most tax-efficient method and handle your Self Assessment so it’s done right.