How Rent-a-Room Relief Works
Rent-a-Room Relief lets you earn up to £7,500 per tax year from renting out furnished accommodation in your main home, completely free of Income Tax. The relief is automatic. If your rental income stays below £7,500, you don't need to tell HMRC or file a tax return for it.
The £7,500 covers everything: rent payments, money for meals if you provide them, and any charges for laundry or cleaning services. All of it counts towards the threshold.
The accommodation must be furnished. At minimum, the room needs a bed. The relief does not apply to unfurnished rooms.
Key Rules
- ✓The property must be your main residence. You cannot claim on a second home or buy-to-let.
- ✓You must rent out a room, not the entire property. If you let the whole house while you're away, this relief does not apply.
- ✓The room must be furnished at minimum with a bed.
- ✓If you share ownership of the home, the £7,500 is split equally between you. Two joint owners get £3,750 each.
- ✓You can be a homeowner or a tenant. Tenants who sub-let a spare room qualify too, as long as their tenancy agreement allows it.
Worked Example: Earning Under £7,500
Lisa rents out her spare bedroom to a lodger for £600/month. She provides a furnished room with shared use of the kitchen and bathroom.
- Monthly rent: £600
- Annual rent: £600 x 12 = £7,200
- Rent-a-Room threshold: £7,500
- Taxable amount: £0
Lisa keeps the full £7,200. She does not need to declare it to HMRC or file a Self Assessment return for this income. The relief applies automatically.
What Happens Above £7,500
If your rental income exceeds £7,500, you have two choices. You must register for Self Assessment either way.
Option A: Use the Rent-a-Room allowance
Deduct £7,500 from your total rental income. Pay tax on the remainder. You cannot deduct any actual expenses if you choose this option.
Option B: Claim actual expenses
Opt out of Rent-a-Room Relief entirely and instead deduct your actual costs: a proportion of mortgage interest, council tax, insurance, utilities, repairs, and cleaning. You give up the £7,500 allowance but may end up with a smaller taxable figure if your costs are high.
Here's a comparison. Suppose Mark earns £9,000/year from a lodger and has £2,500 in allowable expenses:
| Option A: Allowance | Option B: Actual Expenses | |
|---|---|---|
| Gross rental income | £9,000 | £9,000 |
| Deduction | £7,500 (allowance) | £2,500 (actual costs) |
| Taxable income | £1,500 | £6,500 |
| Tax at 20% (basic rate) | £300 | £1,300 |
In this case, the Rent-a-Room allowance saves Mark £1,000 in tax compared to claiming actual expenses. Option B only beats Option A if your actual expenses exceed £7,500, which is unusual for a single room.
When Actual Expenses Beat the Allowance
Claiming actual expenses can work out better if you have very high rental income and large deductible costs. For example, if you rent a large room in central London for £1,200/month (£14,400/year) and your allowable expenses come to £8,000, the actual expenses route gives you taxable income of £6,400 vs £6,900 under the allowance.
This is rare. For most people earning close to the £7,500 mark, the allowance is better because it gives a flat £7,500 deduction with no receipts needed.
Airbnb and Short-Term Lets
Rent-a-Room Relief applies to short-term lets on platforms like Airbnb, Booking.com, or SpareRoom, provided you are letting a room in your main home and you continue to live there during the let.
The total income from all platforms counts towards the single £7,500 threshold. If you earn £4,000 from Airbnb and £2,000 from a weekday lodger, your total is £6,000, which is under the limit.
If you rent out your entire property on Airbnb while you go on holiday, that income does not qualify for Rent-a-Room Relief. You are letting the whole property, not a room. That income must be declared as property income on a Self Assessment return.
Airbnb service fees do not reduce your gross income for the purposes of Rent-a-Room. If a guest pays £100 and Airbnb takes £3, your gross receipt is still £100.
What Counts as "a Room in Your Home"
HMRC's definition is broad. Any room within your main residence qualifies, including:
- A spare bedroom (the most common arrangement).
- A loft conversion or basement room, as long as it's part of the main dwelling.
- A room in a flat or apartment.
It does not include:
- A self-contained annex with its own entrance and kitchen. HMRC may treat this as a separate dwelling.
- A property you own but don't live in.
- A room in a property where you're not resident (for example, if you've moved out but still own it).
Edge Cases
- You also run a business from home: Rent-a-Room Relief only applies to residential letting income. If you use the room as a B&B and provide meals, the meal income still counts towards the £7,500 threshold. But if you use the room as a workspace (for example, a therapy room), that is trading income, not letting income, and it does not qualify.
- Your lodger pays bills directly: If your lodger pays their share of the gas bill directly to the energy company rather than to you, that payment does not count towards your gross receipts. Only money paid to you (or on your behalf for rent) is included.
- Mid-year changes: If you take in a lodger partway through the tax year, the £7,500 threshold is not reduced. You get the full allowance even if you only rent the room for three months.
- You're a council or housing association tenant: You can use Rent-a-Room Relief as a tenant, but check your tenancy agreement first. Many social housing tenancies restrict sub-letting. You need written permission from your landlord.
- Capital Gains Tax when you sell: Having a lodger in a room of your main home does not affect your Principal Private Residence relief for Capital Gains Tax, as long as the lodger shares your living accommodation and it's not a self-contained let.
Common Questions
Does Rent-a-Room Relief apply to Airbnb income?
Yes, as long as you are renting out a room in your main home and not the entire property. If you list a spare bedroom on Airbnb while you continue living there, the income qualifies. If you rent out your whole flat while you go away on holiday, it does not qualify because you are letting the entire property, not a room within it.
Can I claim Rent-a-Room Relief if I live in a shared house?
Yes, if you are the homeowner or the tenant with the right to take in a lodger. The relief applies to the person who receives the rent. If you and a partner jointly own the home, the £7,500 threshold is split between you: £3,750 each. This also applies to any joint owners, not just married couples.
Do I need to use a letting agency, or can I find a lodger myself?
You can do either. Using SpareRoom, OpenRent, or a local letting agency does not affect your eligibility. The fees you pay to an agency count as part of your gross receipts calculation if you switch to the actual expenses method, but under the Rent-a-Room allowance they are irrelevant because you simply compare total income against the £7,500 threshold.
Does having a lodger affect my council tax?
A lodger does not count as a separate household for council tax purposes. Your council tax bill stays the same. If you live alone and currently get the 25% single person discount, taking in a lodger will cause you to lose that discount because there will be two adults in the property. That is worth checking before you commit, as the lost discount could be £300 to £500 per year depending on your council tax band.
Do I need to tell my mortgage lender?
Most mortgage lenders require you to notify them if you take in a lodger, though almost all will allow it on a standard residential mortgage. You do not usually need to switch to a buy-to-let mortgage for a single lodger in your own home. Check your mortgage terms or call your lender to confirm.
How to Opt In or Out
If your income is under £7,500, you don't need to do anything. The relief applies automatically and you do not need to register for Self Assessment.
If your income exceeds £7,500, you must register for Self Assessment. On your tax return, you elect to use the Rent-a-Room allowance (Option A) or calculate actual expenses (Option B). The deadline for opting in or out is the 31 January following the end of the tax year.
If you want to switch from the allowance to actual expenses (or vice versa), you can change your election each year on your tax return.