The Rent a Room scheme

If you let a furnished room in the home you live in, the government's Rent a Room scheme lets you earn up to £7,500 a year from it without paying tax. Here is how it works, who can use it, and when it is better not to.

The short answer

  • Up to £7,500 a year is tax-free - the threshold has been £7,500 since April 2016.
  • It halves to £3,750 if somebody else also receives income from letting rooms in the same home, such as a partner or joint owner.
  • Below the threshold it is automatic. You do not need to tell HMRC or fill in a tax return for this income.
  • Above it, you need to file a tax return. By default you are taxed on your profit after allowable expenses; or you can elect instead to be taxed on everything you receive above the threshold, with no expenses deducted.

Who can use it

The scheme is for letting furnished accommodation in your only or main home - a room to a lodger, for example. You do not have to own the home: a tenant can use it too, provided their own tenancy allows them to take in a lodger.

It does not apply when:

  • the room is unfurnished;
  • part of the home has been made permanently into a separate flat that you let out;
  • the home is not where you live - letting a whole property is ordinary property income.

What counts towards the threshold

The threshold is measured against everything you receive for the room, before expenses - the rent, and anything you charge on top for meals, cleaning, laundry or bills. A lodger paying £650 a month including bills brings in £7,800 a year, which is over £7,500 even though your costs may take a good part of it.

Which way costs less

If you are over the threshold, work it out both ways. Being taxed on your actual profit is better when your allowable expenses - a share of the household bills, insurance, cleaning, repairs - come to more than the threshold. Being taxed on the amount above the threshold is better when they do not. The rules on which expenses are allowable are HMRC's, and some costs you might expect to count, such as mortgage interest, are treated differently.

Before you take in a lodger

Tax is one part of it. You will also need to think about your mortgage lender or landlord, your insurance, council tax, and the right-to-rent check. Our guide to taking in a lodger covers them, and our right-to-rent guide explains the check.

A plain-English summary, last reviewed in October 2026. It is not tax advice - check the current rules on GOV.UK or with an accountant before relying on it.