Yes, you may pay tax for having a lodger, but only if you earn more than £7,500 a year from them. Under the UK’s Rent a Room Scheme, the first £7,500 of income from letting a furnished room in your own home is tax-free, and the relief applies automatically. Stay at or below that figure and you owe nothing, file nothing, and tell HMRC nothing. Go over it and you’ll need to declare the income through Self Assessment.
What the £7,500 Allowance Covers
The £7,500 is a gross figure, not just rent. Everything your lodger pays you counts towards it: rent, contributions to bills, and charges for meals, laundry, cleaning, heating, or internet. Add it all up across the tax year (6 April to 5 April) and compare the total to £7,500.1GOV.UK. Rent a Room in Your Home – The Rent a Room Scheme
If two or more people share the income from the same property, for example joint owners, the allowance is split equally. Each person gets £3,750 rather than a full £7,500.2HM Revenue & Customs. Rent a Room Relief Increase A couple renting a spare room out together, then, has the same combined allowance as a solo homeowner.
Under the threshold, the exemption is automatic. There is no form, no registration for Self Assessment, and no reporting requirement. You can, however, choose to opt out if your actual expenses exceed £7,500 and you’d prefer to claim a loss. To opt out you must tell HMRC within one year of 31 January following the end of the relevant tax year.3HM Revenue & Customs. HS223 Rent a Room Scheme 2025
When the Scheme Does Not Apply
The relief only covers certain arrangements. If yours doesn’t fit, the income is taxed under normal property income rules and the £7,500 allowance isn’t available. The scheme doesn’t apply if:
- The room you let is unfurnished.
- The accommodation isn’t part of your main home — a self-contained flat with its own entrance, or a property you don’t live in, doesn’t qualify.
- The space is used as an office or for business purposes. A lodger who simply works from their room in the evenings or at weekends, or who is a student with study facilities, is fine.
- You live abroad while letting the room.
These conditions come from HMRC’s own helpsheet for the scheme.3HM Revenue & Customs. HS223 Rent a Room Scheme 2025
How Tax Works Above £7,500
Once your gross lodger income for the tax year exceeds £7,500, some of it becomes taxable. You have two ways to work out how much.
Method A: Actual Profit
This is HMRC’s default. You take your total receipts and deduct allowable expenses, including a proportional share of utility bills, council tax, insurance, and repairs or maintenance relating to the lodger’s room. Tax is charged on the profit that remains. Method A also lets you claim capital allowances on furnishings. It tends to help when your hosting costs are high relative to what the lodger pays.
Method B: The Flat £7,500 Allowance
Subtract £7,500 from your gross receipts and pay tax on whatever is left. No expenses, no capital allowances on top. Simpler, and usually better when your actual costs are modest.3HM Revenue & Customs. HS223 Rent a Room Scheme 2025
To use Method B, you have to elect it on your tax return. That election stays in force until you tell HMRC to switch back. Either change must be notified within one year of 31 January following the end of the tax year.4HM Revenue & Customs. HS223 Rent a Room Scheme 2023 Run the numbers both ways each year and pick whichever gives the lower taxable figure.
How to Report Lodger Income
Below £7,500, there is nothing to report. Above it, you need to complete a Self Assessment return. The main form is the SA100, with the SA105 supplementary page for UK property income; on the SA105 you claim Rent a Room relief, enter your gross income, and indicate whether you’re using Method A or Method B.5GOV.UK. Self Assessment Tax Return Forms
For the 2024–25 tax year, online returns are due by 31 January 2026, and paper returns by 31 October 2025. Any tax owed must also be paid by 31 January.6GOV.UK. Self Assessment Tax Returns – Deadlines
Keep records of every payment the lodger makes, including money for meals or services. If you’re using Method A, keep receipts for every expense you plan to deduct. HMRC expects you to hold these for at least five years from 31 January following the tax year they relate to.7GOV.UK. A General Guide to Keeping Records for Your Tax Returns
Penalties if You Miss the Deadline
An online return filed after 31 January triggers an automatic £100 penalty, even if there’s no tax to pay. From there:
- After 3 months: £10 a day, up to £900.
- After 6 months: a further 5% of the tax due, or £300 if greater.
- After 12 months: another 5% of the tax due, or £300 if greater.
Late payment is charged separately: 5% of the unpaid tax at 30 days, another 5% at six months, and another 5% at twelve months. Interest runs on the outstanding balance from the due date.8GOV.UK. Self Assessment Tax Returns – Penalties Filing on time protects you from the filing penalties even if you can’t pay the tax straight away.
Selling Your Home Later
Homeowners often worry that taking a lodger will cost them capital gains tax when they eventually sell. In most cases it won’t. If your lodger shares your living space, meaning the kitchen, bathroom, and living areas, HMRC does not treat your home as having been let out, and your Private Residence Relief remains intact on sale.9GOV.UK. Tax When You Sell Your Home – If You Let Out Your Home
The exception is if you convert part of the house into a self-contained flat with its own entrance and let that separately. In that case the self-contained portion may not qualify for full Private Residence Relief.
Other Things That Change When a Lodger Moves In
Tax is only part of it. Three other areas are worth checking before your lodger arrives.
Your Mortgage
Most residential mortgage contracts require you to get your lender’s consent before letting any part of the property. Permission is rarely refused for a lodger in a home you still live in, but not asking could technically breach your mortgage terms.
Your Home Insurance
Tell your insurer. Having a lodger is treated as an additional risk, and some providers will add an exclusion (theft without forced entry is a common one), raise the premium, or decline to cover you. Not disclosing a lodger can give the insurer grounds to reject a future claim.
Your Council Tax
If you receive the 25% single person discount, taking in a lodger will almost certainly end it, because the lodger counts as another adult in the household. You’re required to notify your local council when this changes.10GOV.UK. Rent a Room in Your Home – Rent, Bills and Tax Factor the lost discount into the rent you charge.
Universal Credit
If you claim Universal Credit, lodger income is generally disregarded entirely and won’t reduce your award. Other means-tested benefits treat lodger income differently, so check the rules for anything else you receive.