What Is the Rent a Room Scheme? A Simple Guide for UK Landlords & Tenants
- Jerelyn Aglibao
- Sep 12
- 4 min read
Updated: Sep 20
What Is the Rent a Room Scheme?
The Rent a Room Scheme is a UK government initiative that lets homeowners rent out furnished space in their main home (for example, a spare bedroom) and receive up to a certain amount of rental income tax-free.
In simple terms:
If you let a furnished room (or rooms) in your home to a lodger, the income you earn may be tax-free — as long as it doesn’t go over the threshold.
You don’t need to run a full “business” or register as a landlord. This scheme is designed to be easy and flexible, especially for people letting a room in their home.
Who Can Use It?
Homeowners or Tenants Letting a Spare Room
You must be letting furnished accommodation in your main home. That means the rented room is part of where you live, not a separate property.
You can be a homeowner or a tenant yourself (as long as your tenancy agreement allows sub-letting or you have the landlord’s permission).
Lodgers, Roommates, or Boarders
The people renting the room are typically called “lodgers.” They live with you in your home and pay rent — they’re not completely separate tenants in a self-contained flat.
What’s the Tax Benefit?
Annual Threshold
The key benefit is that you can receive up to £7,500 per year tax-free from renting out furnished accommodation under the Rent a Room Scheme. If you share the income with someone else (for example, you jointly let the room), the threshold is halved to £3,750 each.
Note: The threshold figure was £7,500 in recent years. Always check the current HMRC guidance to confirm the exact threshold for the tax year you’re in.
Two Ways to Claim
Use the Rent a Room Scheme allowance — don’t declare the income on your tax return, and HMRC treats it as tax-free (up to the threshold).
Opt out of the scheme — declare actual rental income and expenses on your tax return. This might make sense if expenses are high or income is above the threshold.
If your income from letting a room is more than the threshold, you’ll need to pay tax on the excess (unless you choose to compute actual profits by opting out).
What Counts as “Furnished Accommodation”?
To qualify, the room must be furnished — but HMRC doesn’t provide a strict checklist. Some examples:
A bedroom with a proper bed, wardrobe, shelving, and somewhere to sit or work.
Shared use of kitchen, bathroom, living space.
You might charge a higher rent if you provide additional services, like cleaning, laundry, or meals, but that can affect whether you’re still operating under a simple “lodger” arrangement or a more commercial enterprise.
Things Landlords & Tenants Should Know
For Landlords (Households Letting a Room)
Keep basic records of how much you charge, and how long the room was let. If you’re under the threshold and using the scheme, you won’t necessarily need a formal tax return for the income, but records are good practice.
If your rental income is likely to exceed the threshold, run a quick calculation: could claiming actual expenses (e.g. furnishing, cleaning, utility‐share, maintenance) reduce your tax bill more than using the “tax-free threshold” simplifies things?
You’re still responsible for safety standards: smoke detectors, gas safety (if you have gas appliances), electrical safety, fire escape routes, etc.
Clarify with your mortgage provider, insurer or local council whether letting a room under the scheme affects your mortgage or insurance or local regulations.
For Tenants / Lodgers
Be clear what is included in the rent: furniture, utilities (water, electricity, internet), shared or private use of kitchen/bathroom, and whether meals or laundry are included.
Discuss house rules upfront: cleaning rota, guest policy, noise, shared spaces, visitors, pets, etc.
Know your status: lodgers usually have fewer formal tenant rights than people living in a separate tenancy agreement. Being a lodger living with the homeowner means more flexible but possibly fewer “tenancy protections.”
Example Scenarios
Scenario 1: Spare Room in a Family Home
Samantha owns a three-bedroom house. She lives in two of the bedrooms and lets out the third, fully furnished, to a lodger for £500/month.
Annual income: £6,000 — under the £7,500 threshold.
She uses the Rent a Room Scheme, doesn’t declare the income on her tax return, and pays no tax on it.
She shares utilities (electricity, water, internet) with the lodger, and the lodger pays a share of those costs.
Samantha keeps a simple log of payments each month, and keeps receipts for furnishing the room (in case she wants to compare “expenses vs tax-free allowance” in the future).
Scenario 2: Exceeding the Threshold
Jovy rents out two spare bedrooms in his home to lodgers, collecting £9,000/year total.
The Rent a Room tax-free threshold is £7,500.
Jovy can either: (a) claim the full threshold and pay tax on the extra £1,500 or (b) opt out of the scheme and declare full income (£9,000) minus actual expenses (e.g. furnishing, cleaning, utilities share).
If his costs (furniture, utilities contribution, cleaning, maintenance) are high enough, it might reduce his taxable profit more than just using the simple tax-free allowance.
Final Thoughts
The Rent a Room Scheme is a straightforward way for homeowners or tenants with spare space to generate extra income without the hassle of becoming full-scale landlords or navigating complex tax returns.
It offers simplicity, flexibility, and tax relief — as long as you stay within the rules.
If you’re considering letting a room:
Check the latest HMRC threshold for the tax-free amount.
Keep clear records of rents charged and any expenses or services provided.
Talk openly with your lodger about what’s included in the rent, house rules, and shared responsibilities.
Consider whether the simplicity of the scheme outweighs the benefits of treating the letting as a business rental (especially if income or costs are high).
Duo Accountants can help run a “what-if” calculation: should you use the Rent a Room allowance, or declare actual income and expenses? We can help you evaluate which gives a better financial outcome — and make sure you stay compliant.
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