The Rent-a-Room scheme allows anyone who lets a furnished room in their only or main home to receive up to £7,500 tax-free from a lodger each year. The relief is automatic, if gross lodger income is below £7,500 in the tax year, no Income Tax is due and no Self Assessment return is needed solely because of the lodger income.
£7,500 threshold (£3,750 each for joint owners). Relief is automatic below the threshold. Above the threshold: choose between paying tax on the excess OR opting out and deducting actual allowable expenses.
Who qualifies?
- You own or rent your home and live there yourself
- You let a furnished room in the same property
- The property is your only or main residence
- For joint owners: threshold is split equally (£3,750 each)
The two options above £7,500
- Option 1, Stay in the scheme: pay Income Tax only on gross income above £7,500. No expenses deductible. Best when actual expenses are low.
- Option 2, Opt out: declare full gross income and deduct actual allowable expenses (proportional utilities, council tax, insurance, repairs). Best when actual expenses exceed £7,500 or are high relative to income.
- You can switch between options in different tax years
Lodger vs tenant after 1 May 2026
A lodger sharing your home is a licensee, not a tenant. The Renters' Rights Act 2025 does not apply to lodger arrangements where the landlord lives in the property. Lodgers do not have security of tenure and can be asked to leave on reasonable notice. Always use a written Lodger Agreement (not a tenancy agreement) to preserve the licence relationship.
Even with lodgers, HMO mandatory licensing applies if your property becomes occupied by 5 or more people from 2 or more households. Check HMO thresholds before taking in multiple lodgers.