Rent a Room Scheme: Earn Up to £20,070 a Year Tax-Free

What is the Rent a Room Scheme?

Rent a Room relief is an optional HMRC scheme, introduced back in 1992, that lets you earn up to £7,500 in a tax year completely tax-free from letting out furnished accommodation in your own home — for example to a lodger, a student, or a long-term tenant who shares your home.

Add that £7,500 to the standard £12,570 Personal Allowance and, in theory, you could have £20,070 of total income in a year without paying a penny of income tax on it — as long as the rest of your income stays within your Personal Allowance too.

Who can use it?

You can use Rent a Room relief if:

• You let out a furnished room (or rooms) in the property that is your main home — not a separate flat, annexe, or buy-to-let.
• The tenant could be a lodger, student, professional, or short-term visitor (e.g. via Airbnb-style platforms, in some cases).
• You're an owner-occupier or a tenant yourself (if your tenancy agreement allows subletting).

If you let out an unfurnished room, or a self-contained flat that isn't part of your main residence, Rent a Room relief doesn't apply — that income falls under normal property income rules instead (with the £1,000 property allowance as the equivalent for small landlords).

How much can you earn tax-free?

The threshold is £7,500 per tax year (6 April to 5 April) for a sole owner. If you share the income with someone else — for example a partner who also owns the home — the threshold is halved to £3,750 each.

This £7,500 covers gross rental income before any expenses or deductions — it's not a deduction you subtract from a bigger figure, it's a straight tax-free ceiling.

Do you need to tell HMRC?

If your rent-a-room income is £7,500 or less and you have no other reason to file a Self Assessment, the exemption is automatic — you don't need to do anything or tell HMRC.

If your income is over £7,500, you must register for Self Assessment and report the income on the property pages (SA105). You then have a choice:

• Rent a Room basis: pay tax only on the amount over £7,500, with no deduction for expenses.
• Normal property income basis: declare the full rental income and deduct actual allowable expenses (a share of bills, repairs, wear and tear, mortgage interest relief, etc.) instead.

You can pick whichever method results in less tax for you — and you can switch between them from year to year, as long as you opt in/out correctly on your return.

Rent a Room vs. the £1,000 Property Allowance

Don't confuse Rent a Room relief (£7,500, only for letting a room in your own home) with the separate Property Income Allowance (£1,000, available to any landlord with small amounts of rental income from any UK property). You can't claim both reliefs on the same income — pick whichever applies and gives the better result.

A worked example

Maria works part-time and earns £11,000 a year. She rents out a furnished spare room to a lodger for £150/week (£7,800/year).

• Her employment income (£11,000) is covered by her Personal Allowance.
• Her rent-a-room income is £7,800 — £300 over the £7,500 threshold.
• Using the Rent a Room basis, she pays basic-rate tax (20%) only on the £300 excess — just £60 in tax for the year.

Without the scheme, she'd have had to declare the full £7,800 and work out actual expenses to offset it — far more admin for a similar (or worse) result.

This article is for general guidance only and is not personalised tax advice. Always check the latest figures and rules on gov.uk or speak to a qualified accountant for your specific situation.