Taking in a lodger is one of the most tax-efficient ways to earn extra income in the UK. Under the rent-a-room scheme, you can receive up to £7,500 a year completely tax-free — no receipts needed, no complex calculations. Here’s how it works.
What Is Rent-a-Room Relief?
Rent-a-room relief is a government scheme that lets you earn up to £7,500 per year from renting out a furnished room in your home without paying any tax on it. The room must be in your main residence — the home where you actually live.
If you earn under £7,500, you don’t need to do anything. The income is automatically tax-free and you don’t need to report it to HMRC.
What Counts as a “Furnished Room”?
The room you let must be furnished — at minimum, a bed and basic furniture. It must also be in your only or main home. This includes:
- A spare bedroom rented to a lodger
- Multiple rooms let to one or more lodgers
- Rooms let through platforms like SpareRoom or Airbnb
- Bed and breakfast accommodation (if it’s your home)
It doesn’t include separate self-contained flats, annexes with their own entrance, or properties you don’t live in yourself.
The £7,500 Threshold
The relief applies to gross receipts — the total rent you receive, including any amounts for meals, cleaning, or laundry you provide. If your lodger pays £600 a month (£7,200 a year), you’re comfortably within the limit. Add in £30 a week for meals and you’d hit £8,760 — now you’re over.
Important: If you share ownership of the property with someone else (a spouse or partner, for example), the £7,500 is split between you. You each get £3,750.
What If You Earn More Than £7,500?
If your rental income exceeds £7,500, you have two options:
Option A: Use the allowance Deduct £7,500 from your total income and pay tax on the rest.
Rental income: £9,000 Less allowance: −£7,500 Taxable amount: £1,500
Option B: Claim actual expenses Ignore the allowance and deduct your real costs instead.
This might work better if your expenses are high — perhaps you provide meals, do significant laundry, or have other costs exceeding £1,500. But for most lodger arrangements, expenses are minimal and Option A wins.
You need to actively choose Option A by noting it on your Self Assessment return. If you don’t, HMRC assumes you’re using Option B.
Do You Need to Tell HMRC?
If your income is under £7,500, you don’t need to report it at all. No Self Assessment required.
If your income is over £7,500, you must register for Self Assessment and file a return. You’ll report the full income and claim the relief.
Does It Affect Your Mortgage or Insurance?
Rent-a-room relief is a tax rule — it doesn’t override other agreements. Check:
- Your mortgage: Some lenders require permission before you take in a lodger. Most are fine with it, but ask first.
- Your insurance: Tell your home insurer. Taking in a lodger can affect your policy, and failing to disclose it might invalidate your cover.
- Your lease: If you rent your home, check whether subletting is allowed.
Does It Affect Benefits?
Possibly. Income from a lodger can affect means-tested benefits like Universal Credit or Housing Benefit. The rent-a-room scheme makes it tax-free, but benefit rules are separate. Check with the relevant benefit office before taking in a lodger.
Can Landlords Use It on Rental Properties?
No. Rent-a-room relief only applies to your main home — the one you live in. If you’re a landlord letting out an entire property you don’t live in, this scheme doesn’t apply. You’ll use normal rental income rules instead.
A Quick Comparison
| Situation | Best Option |
|---|---|
| Lodger income under £7,500 | Rent-a-room (automatic, tax-free) |
| Lodger income over £7,500, low expenses | Rent-a-room allowance (Option A) |
| Lodger income over £7,500, high expenses | Actual expenses (Option B) |
| Letting a whole property you don’t live in | Not eligible — use standard rental rules |
For most people letting a spare room, rent-a-room relief keeps things beautifully simple. Up to £7,500 a year, no tax, no paperwork — just extra income.
Rent-a-room relief can’t be combined with the £1,000 property income allowance on the same income.