Rent-a-Room Scheme

Do you let out a room in your home to a lodger ?

The rent-a-room scheme is a set of special tax rules designed to help homeowners who rent-a-room in their home. The current tax-free threshold of £7,500 per year has been in place since 6 April 2016.

The relief only applies to the letting of furnished accommodation and is used when one bedroom is rented out in a furnished house to a lodger.

The relief also simplifies the administrative burden for you as you won’t need to keep large amounts of records, just perhaps the amount your lodger pays you.

If your let is in a jointly owned property then the amount of £7,500 is halved.

The rent-a-room limit includes any amounts received for meals, goods and services provided, such as cleaning or laundry.

If your gross receipts are more than the limit, taxpayers can choose between paying tax on the actual profit (gross rents minus actual expenses and capital allowances) or the gross receipts (and any balancing charges) minus the allowance – with no deduction for expenses or capital allowances.