The Rent a Room Scheme lets you earn up to £7,500 a year tax-free from letting a furnished room in your main home to a lodger. If your gross receipts stay under that figure, the exemption is automatic: no registration, no tax return, no paperwork. Cross the threshold and you owe tax on the excess, but you get to choose how it’s calculated.
How the £7,500 Allowance Works
The allowance applies to gross rental receipts from furnished accommodation in your main residence.1GOV.UK. Rent a Room in Your Home – The Rent a Room Scheme If two people share ownership of the property and both receive lodger income, the £7,500 is split in half, giving each owner a £3,750 allowance.2GOV.UK. HS223 Rent a Room Scheme (2025)
Below the threshold, you have nothing to do. The income is exempt and you don’t need to tell HMRC. That’s the whole scheme for most people renting out a single spare room.
Which Lettings Qualify
The room must be furnished and inside your main home. Letting a separate flat, a detached outbuilding, or an unfurnished room falls outside the scheme.1GOV.UK. Rent a Room in Your Home – The Rent a Room Scheme The accommodation has to be used residentially too, so letting a room purely as an office or workspace doesn’t qualify.
You don’t need to own the property outright to use the scheme, but the letting has to be genuine residential accommodation in the place you actually live.
What Counts Toward the £7,500
Gross receipts means everything the lodger pays you, not just the headline rent. Charges for meals, laundry, cleaning, or any other service you provide all count toward the limit.3GOV.UK. HS223 Rent a Room Scheme (2024) Someone charging £500 a month rent plus £100 a month for meals is already at £7,200 for the year and closer to the ceiling than the rent figure alone suggests.
Add up everything the lodger hands over before you assume you’re comfortably under.
When Your Lodger Income Goes Over £7,500
Once gross receipts exceed the threshold, tax is due on the excess and HMRC gives you two ways to work out the taxable amount.
Method A is the default. You take your actual receipts, subtract your allowable expenses, and pay tax on the resulting profit.3GOV.UK. HS223 Rent a Room Scheme (2024) Allowable expenses have to be incurred wholly and exclusively for the letting,4GOV.UK. HMRC Property Income Manual PIM2010 – Deductions: General Rules: Applying the Wholly and Exclusively Rule which for a lodger usually means apportioning household costs like heating, electricity, water, council tax, and insurance based on the share of the property the lodger uses.5GOV.UK. Work Out Your Rental Income When You Let Property Repairs to the lodger’s room or shared areas qualify; capital improvements like an extension or a new bathroom do not.
Method B ignores your actual expenses. You simply take your gross receipts, subtract the £7,500 allowance, and pay tax on whatever is left.3GOV.UK. HS223 Rent a Room Scheme (2024)
Which one wins depends on how much you actually spend. Take £9,000 of lodger income and £2,000 of genuine expenses. Method A leaves £7,000 taxable. Method B leaves £1,500 taxable. Method B is the clear winner. Push those expenses up to £3,000 and Method A drops the taxable figure to £6,000, beating Method B. Run both calculations before you decide.
Neither method lets you turn lodger income into a tax loss. If claiming a loss to offset other income matters to you, you have to opt out of the Rent a Room Scheme entirely and use the standard property income rules.
Choosing and Switching Methods
To use Method B, notify HMRC within one year of the 31 January following the end of the relevant tax year. You can switch between the two methods from one year to the next, but you have to tell HMRC each time you change.3GOV.UK. HS223 Rent a Room Scheme (2024) If you say nothing, Method A applies by default.
How This Compares to the Property Allowance
HMRC also offers a separate £1,000 property income allowance for people with rental income from land or property. You cannot use both: claiming the Rent a Room Scheme rules out the £1,000 allowance for the same income, and the other way round.6GOV.UK. Tax-Free Allowances on Property and Trading Income The Rent a Room allowance is much larger, so for a qualifying furnished lodger arrangement it’s almost always the better route. The £1,000 allowance is mainly relevant for lettings that don’t qualify for Rent a Room, such as unfurnished rooms or separate properties.
Records and Reporting
If you stay under £7,500 and have no other reason to complete a Self Assessment return, you don’t need to report the income at all. Even so, keep records. HMRC expects you to track the dates the room was let, all rent received, any income from services, and any expenses you’d want to claim.7GOV.UK. Keeping Your Pay and Tax Records – Rental Income Rent books, receipts, invoices, and bank statements are enough. If HMRC ever asks whether you genuinely stayed under the threshold, that paperwork is your answer.
Once your gross receipts pass £7,500, or you want to elect Method B, you need to file. Lodger income goes on the SA105 UK Property supplementary pages alongside the main SA100 return.8HM Revenue & Customs. Self Assessment: UK Property (SA105)9HM Revenue and Customs. SA105 2025 – UK Property Under Method A you fill in receipts and itemised expenses; under Method B you enter gross receipts and the £7,500 deduction.
If you’ve never filed a Self Assessment return before, register with HMRC by 5 October following the end of the tax year in which your lodger income first needs reporting. The return itself is due online by 31 January following the end of the tax year, and any tax owed is due on the same date.10GOV.UK. Self Assessment Tax Returns – Deadlines For the 2025–26 tax year, that filing and payment date is 31 January 2027.