Rent a Room Scheme 2026/27

£7,500 Tax-Free Threshold

The Rent a Room Scheme provides a tax-free threshold of £7,500 for the 2026/27 tax year. This means you can receive up to £7,500 in rent (including any amounts paid for services such as meals, cleaning, or laundry) without paying any tax or even having to report the income to HMRC. The threshold applies per property, not per person — if you and your spouse or civil partner jointly own the property and let a room, the £7,500 is shared between you (£3,750 each). If you are unmarried and own the property jointly, the same split applies. The threshold has remained at £7,500 since 2016 (it was temporarily reduced to £7,500 from £4,250 in April 2016). If you receive more than £7,500 in gross rent (including any payments for services), you have two options: use the Rent a Room Scheme and pay tax only on the excess over £7,500 (but you cannot deduct any expenses), or opt out of the scheme and pay tax on your actual profit (rental income minus allowable expenses) using the normal rental income rules. You should choose whichever gives you the lower taxable profit. The £7,500 threshold must be apportioned if the room is let for only part of the tax year. For example, if you let a room for only 6 months of the year, the threshold is reduced to £3,750 (£7,500 × 6/12). There is no requirement to pro-rate the threshold if you let the room for the full tax year but receive rent that covers less than 12 months — the threshold applies per tax year.

Opting In and Out

The Rent a Room Scheme operates on an opt-out basis. If your gross rent is £7,500 or less, you are automatically within the scheme and do not need to do anything — the income is tax-free and you do not need to declare it on your tax return. If your gross rent exceeds £7,500, you are automatically within the scheme by default, but you can opt out if it is not beneficial for you. Opting out means you are treated as receiving normal rental income, and you can deduct your actual allowable expenses (mortgage interest, bills, repairs, insurance, etc.) to arrive at your taxable profit. This is beneficial if your allowable expenses exceed the excess over £7,500. For example, if you receive £10,000 in rent and have £4,000 of allowable expenses, under the scheme you would pay tax on £2,500 (£10,000 - £7,500). By opting out, you would pay tax on £6,000 (£10,000 - £4,000), which is worse. However, if you have £5,000 of allowable expenses, opting out gives you taxable profit of £5,000, which is better than the scheme's £2,500. You opt out by simply declaring the income and expenses on your Self Assessment tax return as normal rental income. You can switch between the scheme and normal rules each tax year depending on which is more beneficial. However, you cannot use the Rent a Room Scheme if you are claiming the £1,000 property allowance for the same property. You must choose one or the other, but not both.

Furnished Residential Accommodation

The Rent a Room Scheme only applies to furnished residential accommodation in your only or main home. This means the room must be let with furniture (bed, wardrobe, desk, etc.) and used as living accommodation. The scheme does not apply to unfurnished rooms, commercial lettings (such as letting a room as an office or workshop), or properties that are not your main home (such as a second home or buy-to-let property that you have never lived in). The accommodation can be a single room, multiple rooms, or a self-contained annexe or flat within your main home. If you let part of your home as furnished accommodation, the scheme applies only to that part. The scheme also covers the provision of services such as meals, cleaning, laundry, and utilities — any payments for these services are included in the gross rent for the £7,500 threshold. If you let a room in your home to a family member, the scheme still applies, but HMRC may scrutinise the arrangement to ensure it is a genuine commercial letting. If you charge below-market rent to a family member, HMRC could argue that there is no intention to make a profit and deny the relief. The accommodation must be available to the public generally — letting only to specific individuals (such as a relative) may not qualify if the arrangement is not commercial.

Sharing with Family

Letting a room to a family member under the Rent a Room Scheme is permissible, provided the arrangement is genuine and at a commercial rent. If you let a room to your adult child, sibling, or parent, the rent you receive is covered by the £7,500 threshold if all other conditions are met. However, HMRC is alert to arrangements where the primary purpose is tax avoidance rather than generating genuine rental income. If you charge a family member significantly below market rent, HMRC may argue that the arrangement is not a commercial letting and deny the relief. It is advisable to have a formal written tenancy or licence agreement, charge a market-rate rent, and treat the arrangement commercially (e.g., the lodger has their own keys, agreed notice period, and pays bills separately or as part of the rent). If a family member is living with you but not paying rent, the Rent a Room Scheme does not apply (there is no rental income). If they pay less than £7,500 per year, the income is automatically tax-free under the scheme. The scheme also applies if you let to a friend or acquaintance — there is no restriction on who the lodger is, as long as the letting is commercial and the property is your main home.

Airbnb Implications

The Rent a Room Scheme can apply to short-term lettings through platforms such as Airbnb, Booking.com, and Vrbo, provided the room you let is in your only or main home. The scheme covers short-term holiday lets, not just long-term lodgers. If you let a room in your main home for short periods through Airbnb and your gross income (including any cleaning fees or service charges) is £7,500 or less, the income is tax-free under the scheme. If your income exceeds £7,500, you can use the scheme (paying tax on the excess) or opt out and use the normal rental rules. However, there is an important distinction: if you are letting out a separate property (not your main home) through Airbnb, the Rent a Room Scheme does not apply — you must use the normal furnished holiday lettings rules or the property allowance instead. The Rent a Room Scheme also does not apply if you are letting out your entire home while you are away — the scheme requires that the property is your main home and that you are letting a room within it (not the whole property). If you let out your entire home on Airbnb while you go on holiday, the income is taxable under the normal rental rules, not the Rent a Room Scheme. Always check whether your Airbnb letting qualifies as Rent a Room or as a furnished holiday letting, as the tax treatment is different.

FAQs

Does the Rent a Room Scheme apply if I am a tenant (not an owner)?

Yes, provided your tenancy agreement allows you to sublet a room. You should check your tenancy agreement and obtain written permission from your landlord before taking in a lodger.

Can I claim the Rent a Room Scheme and the property allowance?

No. You cannot use the Rent a Room Scheme and the £1,000 property allowance for the same property. If you have both Rent a Room income and other property income, you can use the property allowance for the other property and Rent a Room for your main home.

What counts as gross rent for the £7,500 threshold?

Gross rent includes all payments from the lodger, including rent, charges for meals, cleaning, laundry, utilities, and any other services. It is the total amount the lodger pays you, before deducting any expenses.

Do I need to register for Self Assessment if I use the Rent a Room Scheme?

Only if your gross rent exceeds £7,500 and you need to pay tax on the excess, or if you have other income that requires you to file a tax return. If your gross rent is £7,500 or less, you do not need to declare the income.