The Rent a Room Scheme: earn up to £7,500 tax-free from a lodger

By Sam Kane · Last checked 5 October 2026 · Tax rules cover the UK, lodger rules cover England

The Rent a Room Scheme lets you earn up to £7,500 a year from letting furnished rooms in your home without paying income tax on it. If you share the income with someone else, such as a joint owner, the limit is £3,750 each. You can use it if you own your home or if you rent it, but tenants usually need their landlord’s permission to take in a lodger.

The tax rules are set by HMRC and cover the whole UK. The rules on lodgers, permission and checks in this guide cover England only.

The short version

How does the Rent a Room Scheme work?

The scheme is a tax relief. If the total you receive from letting rooms in your home in a tax year is £7,500 or less, you pay no income tax on it. You do not need to tell HMRC, and you do not need to fill in a tax return for it.

The tax year runs from 6 April to the next 5 April.

To use the scheme:

You can let as much of your home as you like. The scheme also covers people who run a bed and breakfast or a guest house in their own home.

What counts towards the £7,500?

The limit is on what you receive, before any costs. It includes:

So if your lodger pays you £600 a month rent plus £50 towards bills, you receive £7,800 in the year. That is over the limit.

Can tenants use the Rent a Room Scheme?

Yes. HMRC says the scheme is for owner occupiers and tenants. If you rent your home and let a furnished room to a lodger, the tax rules are the same.

But in England, you usually need your landlord’s permission before you take in a lodger. Check your tenancy agreement. If you rent from a council or housing association, the rules depend on your type of tenancy, so ask your landlord. If you take in a lodger without permission when you need it, you could break your tenancy agreement.

What if you earn more than £7,500?

If you receive more than the limit, you must fill in a Self Assessment tax return. You then have two ways to work out your tax:

Method A (normal way) Method B (Rent a Room way)
How it works Pay tax on your profit: what you receive minus your costs Pay tax on what you receive above £7,500 (or £3,750)
Can you take off costs? Yes No
Who it suits People with high costs People with low costs

You must tell HMRC if you want Method B. The deadline is one year from 31 January after the end of the tax year.

Example: you receive £9,000 in a year and your costs are £800. Method A taxes £8,200 of profit. Method B taxes £1,500 (£9,000 minus £7,500). Method B is better here.

If you have not filled in a tax return before, you need to register for Self Assessment by 5 October after the end of the tax year in which you went over the limit.

Lodger or tenant: what is the difference?

A lodger lives in your home with you. This guide is about lodgers. In England:

Lodgers are not covered by the Renters’ Rights Act rules for private tenants. Read our guide to the Renters’ Rights Act for what those rules cover.

Things to check before you take in a lodger

  1. Permission. Ask your landlord if you rent. If you own with a mortgage, check with your lender. Check your lease if you own a leasehold flat.
  2. Right to rent. In England, you must check that your lodger can legally rent in the UK before they move in. Read our guide to the right to rent.
  3. Council tax. If you live alone, you may get a 25% single person discount. A lodger usually ends it.
  4. Insurance. Tell your home or contents insurer. Your cover or price may change.
  5. Benefits. See the next section.
  6. Safety. Make sure gas appliances are checked every year and the home is safe from fire.
  7. A written agreement. Set out the rent, when it is due, any deposit, what bills are included, and the notice period.

Does a lodger affect your benefits?

In England:

If your lodger is a family member, or you get other benefits, ask an adviser before you start. Our guide to Housing Benefit and Local Housing Allowance explains how help with rent works.

Is a lodger right for you?

A lodger can make a big difference to a tight budget. £600 a month from a lodger is £7,200 a year, tax-free under the scheme. Our guide to how much rent you can afford shows how to see where that money could go, whether that is your own rent, bills or savings for a deposit. If you hope to buy one day, our guide to Rent to Buy explains another way to save.

But you share your home with someone. Think about privacy, house rules and how you would end things if it does not work out.

If you rent your home, the rent you pay can count for you too. See how Report My Rent works.

Common questions

How much can I earn tax-free under the Rent a Room Scheme?

Up to £7,500 a year, or £3,750 if someone else also gets income from letting rooms in the same home.

Can I use the Rent a Room Scheme if I rent my home?

Yes. The tax rules cover tenants as well as owners. In England, you usually need your landlord’s permission to take in a lodger.

Do I need to tell HMRC if I earn less than £7,500?

No. The tax-free amount is automatic. You only need a tax return if you receive more than the limit.

Does the money my lodger pays for bills count?

Yes. The limit covers everything the lodger pays you, including money for bills, meals, cleaning or laundry.

Can I use the scheme for a self-contained flat?

No. The room must be part of your own home. A home that has been turned into separate flats does not count.

Does the Rent a Room Scheme apply in Scotland, Wales and Northern Ireland?

Yes, the tax rules cover the whole UK. The rules on lodgers and permission are different in each nation.

Sources

You already do the hard part.

You pay your rent every month. From now on, your credit file can show it.

a month