Rent a Room Scheme — the £7,500 Lodger Allowance
Tax-free lodger income in your own home, the two methods above the limit, and what it does not cover — flats, buy-to-lets — plus the MTD interaction.
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 A basic-rate taxpayer saves £1,260 with B. Elect B on your return (Box 37 of the SA105) — the election runs until withdrawn.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.
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.