Rent a Room Scheme 2026/27 — £7,500 Tax-Free Allowance

The short answer

Up to £7,500 a year of rent from a lodger in your own home is tax-free under the Rent a Room scheme — automatically if you are under the limit, by election if you are over it. Above £7,500 you choose: pay tax on receipts minus £7,500 with no expenses, or on receipts minus actual expenses. The scheme is for furnished rooms in the home you live in — not a separate flat or a buy-to-let.

Rent a Room is the simplest relief in property tax and the most misapplied — usually by people trying to use it on a property they do not live in.

Who qualifies

Situation	Rent a Room
Furnished room(s) let to a lodger in your only or main home	Qualifies
A room let while you are temporarily away (home still your main residence)	Usually qualifies
A self-contained flat or annexe with its own entrance	Does not qualify — ordinary rental income
A property you own but do not live in	Does not qualify
Airbnb-style short lets of a room in your home	Qualifies (the limit is per home, per year)
Two owners sharing the income	£3,750 each

Under £7,500: do nothing

If gross receipts (rent plus any charges for meals, cleaning or laundry) are £7,500 or less, the exemption applies automatically. You need not report it unless you want to claim a loss — which means opting out.

Over £7,500: two methods

Method	Taxable amount
Method A — normal	Receipts minus actual expenses, taxed at your marginal rate
Method B — Rent a Room	Receipts minus £7,500, no expenses, taxed at your marginal rate

Worked example: a lodger pays £9,500 a year; your share of expenses is £1,200. Method A taxes £8,300; Method B taxes £2,000. A basic-rate taxpayer saves £1,260 with B. Elect B on your return (Box 37 of the SA105) — the election runs until withdrawn.

What Rent a Room does not affect

CGT: letting a room to a single lodger who lives as part of the household does not lose private residence relief.
Council tax: a lodger may end a single-person discount.
Mortgage / insurance: tell both — most lenders allow one lodger.
MTD: Rent a Room income counts towards gross qualifying income unless fully exempt — a lodger plus a buy-to-let can tip you over the £50,000 threshold.

Rent a Room and the £1,000 property allowance

You cannot use both on the same income. Lodger income uses Rent a Room; a separate buy-to-let can use the property allowance or actual expenses.

gov.uk Rent a Room scheme (HS223) — £7,500 limit unchanged for 2026/27, half each for joint owners; interaction with property allowance per gov.uk; MTD gross-income rule. Checked 2026-08-29, re-checked 31 Aug 2026.

FAQs

Quick answers

£7,500 a year of gross receipts under the Rent a Room scheme (£3,750 each if two people share the income).

No. It applies only to furnished rooms in the home you live in. A separate property, flat or annexe is ordinary rental income.

Choose the better of: receipts minus actual expenses, or receipts minus £7,500 with no expenses. Elect the second on your return.

One lodger living as part of the household does not affect private residence relief on your home.

Rent a Room Scheme — the £7,500 Lodger Allowance