Rent a Room allowance
Best£8,700Money kept
- Rent received
- £9,000
- Allowance
- -£7,500
- Taxable
- £1,500
- Tax
- -£300
Above £7,500 you pay on the excess, but no costs at all may be deducted.
Should I use Rent a Room relief?
Compares the £7,500 Rent a Room allowance against deducting your actual costs. The allowance is not automatic above the threshold, and choosing wrong costs real money.
On the figures so far
The allowance wins by £1,100 — your costs are smaller than the £7,500 it gives you.
The gap is £1,100 — wide enough to be real, and one figure was assumed. To be surer: the share of your household costs that genuinely relates to the lodger — the figure the actual-cost method turns on.
Refine it in 5 questions below.
The decision
The allowance wins by £1,100 — your costs are smaller than the £7,500 it gives you.
£1,100 better than deduct actual costs, on the same figures.
- £7,500Allowance
- £9,000Rent
- 20%Marginal rate
Why
- The allowance is £7,500 and applies to a furnished room in your only or main home.
- Above the threshold you have a choice, and it has to be made each year: £7,500 with no deductions, or actual costs with no allowance. You cannot have both.
- At your marginal rate of 20%, the difference between the two here is £1,100.
Does this apply to you?
Each of these has to be true. Where your answers settle it we have said so; where they cannot, the test is yours to check.
You let a furnished room in your only or main residence. — we cannot tell from your answers
ITTOIA 2005 s. 784
You live in the property at the same time as the lodger. — we cannot tell from your answers
ITTOIA 2005 s. 786
The gross receipts are within the limit, or you are willing to elect. — not met, on your answers
Above the limit the exemption is not automatic — you elect either to pay on the excess with no deductions, or to leave the scheme and use ordinary rules.
ITTOIA 2005 s. 789
The £7,500 is not shared with anyone else receiving this income. — met, on your answers
ITTOIA 2005 s. 790
Your mortgage, insurance and any tenancy allow a lodger. — we cannot tell from your answers
Not a tax rule — the practical gate
What this does not model
- It applies only to a furnished room in your only or main residence. A separate flat, or a property you do not live in, is ordinary property income.
- The choice is annual and has to be made by election — above the threshold, the allowance is not automatic.
- Under the actual-cost method you can make a loss and carry it forward; under the allowance you cannot.
- Letting a room can affect your mortgage terms, your insurance and, if you are a tenant yourself, your own tenancy agreement.
This is information, not tax or financial advice. It shows how the rules apply to the figures you entered — it does not know the rest of your circumstances. Worth checking with an accountant before you act.
Rates as at 6 April 2026 — the 2026/27 tax year.
What to keep
The figures above are only as good as what sits behind them. These are the records HMRC would ask for.
- A record of everything the lodger pays, including contributions to bills, meals and cleaning — all of it counts towards the limit.
- If using actual costs: bills for heat, light, water, insurance and repairs, with the basis of apportionment.
- The lodger agreement and the dates of occupation.
- Written confirmation from your lender and insurer.
The dates that matter
| When | What | If you miss it |
|---|---|---|
| 31 January after the tax year | File the return and make the election, if you are above the limit. | The default applies, which above the threshold means the exemption with no deductions — not always the better answer. |
| Each tax year | The choice is made annually and can change. | Nothing is lost permanently, but a year using the wrong method cannot be improved after the amendment window. |
| 12 months after the filing deadline | Amend the return to change the method for that year. | The year stands as filed. |
How to actually do it
Add up everything the lodger pays
Rent, plus any contribution to bills, meals, laundry or cleaning. The limit is tested on gross receipts, not on profit, which catches people who think of the bills as separate.
Compare against your real costs
Work out the share of household costs attributable to the lodger's use. If that exceeds the allowance, the ordinary rules are better.
Decide, and elect if you need to
Below the limit nothing is needed — the exemption is automatic and there is no entry on the return. Above it, you elect on the return for the method you want.
www.gov.uk/government/publications/rent-a-room-for-traders-hs223-self-assessment-helpsheet
Tell your lender and insurer
Most permit a lodger; almost all require notice. An undisclosed lodger can void buildings and contents cover.
Review it every year
Unlike the vehicle choice, this one is annual. A year with a major repair can flip the answer to actual costs and back again.
Worked examples
Three situations, worked through. They use the same rules as the tool above, so you can check the arithmetic against a case near your own.
£6,000 rent, £2,000 of costs
- Rent a Room
- Exempt — nothing to report
- Actual costs
- £4,000 taxable
- Tax saved by the scheme
- £800 at 20%
Under the limit the scheme wins automatically and needs no paperwork at all. This is most lodger arrangements.
£10,000 rent, £2,500 of costs
- Rent a Room
- £2,500 taxable
- Actual costs
- £7,500 taxable
- Difference
- £1,000 of tax at 20%
Above the limit but with modest costs, the allowance is still worth far more than the deductions it replaces.
£14,000 rent, £9,000 of costs
- Rent a Room
- £6,500 taxable
- Actual costs
- £5,000 taxable
- Difference
- £300 of tax at 20%
Once real costs pass £7,500 the ordinary rules win — and they also allow a loss to be carried forward, which the scheme does not.
The rules behind this
Every figure above comes from one of these. Where we have interpreted rather than calculated, the tool says so.
Rent a Room relief exempts gross receipts up to £7,500 a year from letting furnished accommodation in your only or main residence.
Where more than one person receives income from the letting, the limit is halved to £3,750 each.
Above the limit, you may elect to be taxed on the excess with no deductions, or leave the scheme and use ordinary property rules.
Gross receipts include payments for meals, cleaning and laundry, not only rent.
Losses cannot arise under the scheme; ordinary property losses carry forward against future property income.
Questions people ask
Does the £7,500 include bills the lodger pays me?
Yes. The limit is tested on gross receipts, so a contribution to heating, meals, cleaning or laundry all count. A £600-a-month room plus £100 of bills is £8,400, which is over the limit even though the rent alone is not.
Can my partner and I have £7,500 each?
No. Where two or more people receive income from the same letting the limit is £3,750 each. The scheme gives £7,500 per property, not per person.
Do I have to tell HMRC if I am under the limit?
No. Below £7,500 the exemption is automatic, there is no entry on a tax return, and no records are needed beyond knowing you are under it. It is the simplest relief in the system.
What if my costs are more than £7,500?
Then leave the scheme and use ordinary property rules — you deduct the real costs instead. You elect for this on the return, and the choice can be made again each year.
Does it apply to Airbnb?
It can, if you are letting a room in your own home while living there. Letting the whole property while you are away does not qualify, because the relief requires shared occupation.
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