How does the Rent a Room Scheme work?
The Rent a Room Scheme lets you earn money tax-free by letting a furnished room in your own home, up to an annual limit set by the government. If your rental income is within the limit, you may not have to do anything or pay any tax on it. Above the limit, you have a choice of how to be taxed.
See everything you may qualify for — benefits, grants, reductions and reliefs — in about 3 minutes. Free to check.
Check what you're owed →Rent a Room is designed to make it simpler and more attractive to take in a lodger. If you let a furnished room in the home you live in, the income up to the scheme’s threshold is exempt from tax, and you usually do not even need to declare it if you stay within the limit and have no other reason to file a return.
If your receipts go above the threshold, you can choose between paying tax on the excess over the allowance, or working out your profit in the normal way by deducting actual expenses, whichever gives the better result. The scheme applies to letting a room in your only or main home, not to separate properties or whole homes let out.
Both owner-occupiers and tenants who let a room can sometimes use it, subject to the rules and any agreement with their own landlord. Because the threshold is a fixed annual figure that can change, check the current amount on GOV.UK. The scheme can be a tax-efficient way to bring in extra income, so it is worth understanding before taking in a lodger.
How to use the Rent a Room Scheme
- Check the room qualifies. Confirm you are letting a furnished room in your own main home, which is what the scheme covers.
- Track your rental income. Keep a record of what you receive so you know whether you are within the annual threshold.
- Choose how to be taxed. If you exceed the limit, compare being taxed on the excess against deducting actual expenses, and pick the better option.
- Report if required. Declare the income through Self Assessment if you go over the limit or otherwise need to file a return.
Frequently asked questions
- Do I have to declare income within the limit?
- Usually not, if your rental receipts stay within the scheme’s threshold and you have no other reason to complete a tax return.
- What happens if I go over the threshold?
- You can choose to be taxed on the amount above the allowance, or work out your profit normally by deducting expenses — whichever is better for you.
- Does it apply to a whole property let out?
- No. The scheme is for letting a furnished room in your own main home, not for letting a separate property or an entire home.
- Can tenants use it too?
- Sometimes, if they sublet a room with permission. The rules and any agreement with your own landlord need to be checked first.
MoneyFinder is an independent sign-posting service that helps you find financial support you may be entitled to. We are not a government body and do not provide financial advice. Figures are taken from the official sources cited above and were correct when last checked — always confirm current details on the linked GOV.UK pages.