Rent-a-Room Scheme 2025/26: £7,500 Tax-Free From a Lodger

You can earn up to £7,500 a year tax-free from a lodger — or £3,750 each if you share the income — by letting a furnished room in your only or main home (2025/26 tax year). This is the Rent-a-Room scheme, one of the higher tax-free thresholds available to individuals, and it's surprisingly simple to use.

This guide explains who qualifies, how the scheme works, and when you might be better off not using it.

How the Scheme Works

If you let a furnished room in your only or main home — the home you live in — the first £7,500 of income is completely tax-free. You don't need to tell HMRC about it, and you don't need to file a tax return for this income alone.

The relief is automatic. If you earn less than £7,500 from your lodger, there's nothing to do.

The Rent-a-Room scheme applies across the whole of the UK — England, Wales, Scotland, and Northern Ireland. The £7,500 threshold is the same wherever you live.

Key Facts

Detail	Amount
Tax-free threshold	£7,500 per year (2025/26)
Shared threshold	£3,750 each (2025/26, if you split income with a partner)
What's covered	Furnished room in your main home
Automatic?	Yes, if income is below the threshold

Who Qualifies

You can use the Rent-a-Room scheme if you:

• Live in the property as your main home (you can own it or rent it yourself)
• Let a furnished room — the room needs to have at least basic furniture
• Are a resident landlord — you live in the same property as your lodger

What Counts

• Renting a spare bedroom to a lodger
• Running a small bed and breakfast in your home
• Hosting guests through short-term letting platforms (such as Airbnb) in your own home
• Providing meals or cleaning as part of the arrangement

What Doesn't Count

• Letting a separate flat — even if it's in the same building (e.g., a converted basement flat with its own entrance)
• Renting out your entire home while you're away
• Letting an unfurnished room
• Renting rooms in a property you don't live in — that's standard rental income

The £7,500 Threshold

The threshold applies to your gross income — that's the total amount you receive, before any expenses.

What counts as income:

• Rent payments from your lodger
• Any money you charge for bills — gas, electricity, water, broadband
• Payments for meals, laundry, or cleaning if included
• Any other charges related to the room

In other words, the £7,500 limit is measured against everything your lodger pays you, not just the "rent" portion. If you charge a single all-inclusive figure, the whole amount counts towards the limit.

Example: You charge your lodger £600 per month including bills. Your annual income is £7,200. This is below £7,500, so it's entirely tax-free. No action needed.

Sharing the Income

If you jointly receive the income with someone else — typically a partner or spouse — the threshold is split equally: £3,750 each.

Example: You and your partner let a room for £500 per month (£6,000 per year). You're each treated as receiving £3,000. Both are below the £3,750 individual threshold, so it's tax-free for both of you.

What If You Earn More Than £7,500?

If your income exceeds the threshold, you choose between two methods. HMRC calls them Method A and Method B.

Method A: Pay Tax on Your Profit (the normal way)

• Work out your actual expenses (proportion of utilities, council tax, insurance, repairs, etc.)
• Deduct those expenses from your income
• Pay tax on the profit
• You cannot also claim the £7,500 allowance

This is the default. It applies automatically unless you elect for Method B.

Example: You earn £10,000 and have £8,200 in allowable expenses (proportioned to the room). Taxable profit = £10,000 − £8,200 = £1,800.

Method B: Use the £7,500 Rent-a-Room Allowance

• Deduct £7,500 from your gross income
• Pay tax on the remainder
• You cannot claim any expenses

You have to opt in to Method B (see below).

Example: You earn £10,000 from your lodger. Taxable amount = £10,000 − £7,500 = £2,500.

In this example, Method A (claiming expenses) gives the lower tax bill. If your expenses were small, Method B would come out ahead.

How to Choose

Your Situation	Better Option
Income under £7,500	Automatic — no tax, no action
Income over £7,500, low expenses	Method B (£7,500 allowance)
Income over £7,500, high expenses	Method A (claim actual costs)

Work out both and choose whichever gives you the lower taxable amount.

How to Opt In to the Allowance (Method B)

If your income exceeds £7,500 and you want to use the allowance:

1. File a Self Assessment return
2. Tick the Rent-a-Room box on the property pages
3. Enter your gross income — the £7,500 deduction is applied

Method A (paying tax on your profit) is the default, so if you'd rather claim expenses you just complete the property pages with your income and expenses as normal. See our guide on filing your first tax return as a landlord for help with the SA105 form.

Rent-a-Room vs Property Allowance

These are two different reliefs, and you cannot use both for the same income.

Relief	Amount	Applies To
Rent-a-Room scheme	£7,500 (2025/26)	Furnished room in your main home
Property allowance	£1,000 (2025/26)	Any rental income

If you qualify for Rent-a-Room, it's generally more beneficial — the threshold is 7.5 times higher.

When the property allowance might apply instead: If you rent out a room that doesn't qualify for Rent-a-Room (e.g., unfurnished), the £1,000 property allowance is your fallback.

Practical Considerations

Your Mortgage

Check your mortgage terms before taking in a lodger. Most residential mortgages allow it, but some require you to inform your lender. You generally don't need to switch to a buy-to-let mortgage if you're living in the property and letting a room.

Insurance

Tell your home insurance provider. Taking in a lodger can affect your buildings and contents cover. Most insurers accommodate it without a significant premium increase, but failing to disclose could invalidate a claim.

Council Tax

A lodger doesn't usually affect your council tax. If you live alone and claim a 25% single person discount, taking in a lodger means you'll lose that discount — but the rental income typically more than compensates.

Benefits

Rental income from a lodger can affect means-tested benefits. If you receive Universal Credit or Housing Benefit, check how lodger income is treated before committing.

Tenancy Agreements

Even with a lodger in your own home, it's good practice to have a written agreement covering:

• Rent amount and payment dates
• What's included (bills, meals, internet)
• Notice period for either side
• House rules (guests, smoking, quiet hours)

As a resident landlord, your lodger has fewer legal protections than a standard tenant — but a clear agreement prevents misunderstandings.

Frequently Asked Questions

Does Airbnb income qualify?

Yes, if you're letting a room in your main home and it's furnished. Short-term lets through platforms like Airbnb qualify for Rent-a-Room as long as the property is your primary residence. If you rent out an entire separate property through Airbnb, that's standard rental income — not Rent-a-Room.

Does the Rent-a-Room Scheme include bills?

Yes — if you charge your lodger for bills, that money counts as part of your Rent-a-Room income. Whether you bundle gas, electricity, water, and broadband into one all-inclusive figure or itemise them separately, it all counts towards the £7,500 limit. The same applies to charges for meals, laundry, or cleaning. So if your rent is £550 a month and you add £100 for bills, HMRC treats your income as £650 a month (£7,800 a year) — just over the threshold.

How much can I charge a lodger before paying tax?

You can receive up to £7,500 a year (about £625 a month) from a lodger tax-free under the scheme, or £3,750 each if you share the income with someone else. This figure includes any amount you charge for bills and services, not just the rent itself. Below that level there's no tax to pay and nothing to report.

Do I need to tell HMRC if I earn under £7,500?

No. The exemption is automatic. You only need to file a Self Assessment return for this income if it exceeds £7,500 (or £3,750 if shared). However, it's still worth keeping basic records — see our landlord tax records checklist for what to track.

Can I use Rent-a-Room if I'm a tenant myself?

Yes. You don't need to own the property — you just need to live there as your main home. Check your tenancy agreement first, as your landlord may need to give permission for sub-letting.

What if I only let the room for part of the year?

The £7,500 threshold applies to the full tax year regardless of how many months you let the room. There's no pro-rata reduction.

Can I let more than one room?

Yes. The £7,500 threshold covers your total income from all rooms in your home combined. If you let two rooms for £400 each per month, your annual income is £9,600 — over the threshold.

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This guide is for informational purposes only and does not constitute tax, legal, or financial advice. Tax rules change frequently. Always verify current requirements on GOV.UK or consult a qualified accountant for your specific situation.

Official Sources

• Rent a Room in your home — GOV.UK
• Rent a Room Scheme (Self Assessment helpsheet HS223) — GOV.UK
• Work out your rental income when you let property — GOV.UK