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Rent Your Spare Room News Item

Rent a Room scheme : How it works and tax rules

The Rent a Room scheme is an optional scheme that’s open to owner occupiers or tenants who let out furnished accommodation to a lodger in their main home. It allows you to earn up to £4,250 a year tax-free, or £2,125 if you are letting jointly.

You don’t have to be a homeowner to take advantage of the scheme. If you’re renting you can also lease out a room to a lodger, as long as your own lease allows you to do so.

Opting in or out of the scheme

If the amount you earn from renting out the room is less than the thresholds of the Rent a Room scheme, then your tax exemption is automatic and you don’t need to do anything.

If you earn more than the threshold, you must complete a tax return (even if you don’t normally). You can then do one of the following:

choose to opt into the scheme – in which case you need to let HM Revenue & Customs know this on your tax return and claim your tax-free allowance
not opt into it – in which case you simply record your income and any associated expenses on the property pages of your tax return
To ask to be sent a tax return if you don’t normally receive one, contact HM Revenue & Customs using the link below.

Contact HM Revenue & Customs to ask for a tax return form
There’s no special form for telling HM Revenue & Customs that you don’t want to be part of the scheme. If you earn more than the threshold or already complete a tax return you simply declare the relevant lettings income and expenses when completing your tax return.

Providing meals and services

You may wish to charge for additional services when you take in a lodger, such as providing meals or laundry services.

The money you receive for these services must be added to the rent you receive to work out your total income. If your total income is more than £4,250 for the tax year (6 April to 5 April), and your overall income is greater than the individual Personal Allowance, you will need to pay some tax.

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