Rent a Room scheme — Basics for landlords

The government’s Rent a Room Scheme allows owner-occupiers and tenants in England to earn up to £7,500 per year tax-free from letting furnished rooms in their own home. It is a significant tax relief for anyone considering taking in a lodger. Understanding the rules helps you make the most of it and stay compliant. Reviewed March 2026.

What the rule is

The Rent a Room Scheme (governed by Chapter 1 of Part 7 of the Income Tax (Trading and Other Income) Act 2005) allows individuals who let furnished accommodation in their only or main home to receive up to £7,500 per year in gross rental income completely tax-free. Where two people share the income from letting (e.g. a couple), the threshold is halved to £3,750 each.

The scheme operates as an automatic exemption — if your income is below the threshold, you don’t need to register or claim it; it applies automatically. If your income is above the threshold, you must use Self Assessment and can choose to use the scheme (paying tax on income above £7,500) or the normal rules (deducting actual expenses from rental income).

When it applies

The scheme applies if:

• You are an owner-occupier OR a tenant with permission to sublet
• The rooms you let are furnished
• The property is your only or main home (not an investment property)
• The let is to a lodger or paying guest (not a business)

The scheme does NOT apply to:

• Letting your home while you live elsewhere
• Letting rooms in investment properties you don’t live in
• Unfurnished rooms

What landlords must do

• Let furnished rooms only in your main home
• Keep track of gross rental income received in the tax year (April 6 to April 5)
• If income is £7,500 or below: no action needed — the exemption is automatic
• If income exceeds £7,500: register for Self Assessment and choose whether to use the Rent a Room Scheme (tax on amount above £7,500) or actual expenses
• Carry out Right to Rent checks for all lodgers
• Consider a written lodger agreement setting out rent, notice, and house rules

What evidence to keep

• Records of all rent received from lodgers (dates, amounts)
• Any deposits taken and returned
• Right to Rent check records
• Written lodger agreement

Common mistakes

• Applying the scheme to investment properties — the scheme is for your home only, not buy-to-let properties
• Letting unfurnished rooms — rooms must be furnished for the scheme to apply
• Forgetting income above the threshold — if you exceed £7,500, you must declare income and pay tax on the excess
• Joint lettings without splitting the threshold — if two people share income from the same letting, each has a £3,750 threshold, not £7,500 each

FAQ

Can tenants use the Rent a Room Scheme? Yes — if you are a tenant with permission from your landlord to sublet, you can use the Rent a Room Scheme for income from a lodger in your home.

What counts as “furnished”? At minimum, a bed, furniture for everyday living, and basic equipment such as curtains or blinds. The room doesn’t need to be fully furnished but should be more than just a room with a floor and walls.

What if I only let the room for part of the year? The £7,500 threshold is for the full tax year. There is no pro-rating — you get the full exemption regardless of how long you let the room in the year.

Does the scheme affect my mortgage? You should check your mortgage terms. Many residential mortgages permit a certain number of lodgers (typically up to 2), but you should confirm with your lender before taking in a lodger.

Where can I find more information on declaring Rent a Room income? HMRC’s Self Assessment guidance at gov.uk covers the Rent a Room Scheme in detail, including how to choose between the scheme and actual expenses.