Lodger Income Tax Calculator
Property Income vs Trade Income for Lodgers
Most lodger arrangements are treated as property income — not subject to National Insurance. If you provide significant services (meals, daily cleaning), HMRC may consider it a trade, making profits subject to Class 4 NI at 9% on profits between £12,570 and £50,270.
The Rent a Room scheme (£7,500 tax-free threshold) applies to both owners and renters letting furnished rooms in their main home.
Frequently Asked Questions
Do I pay income tax on lodger rent UK?
It depends on the amount. If your total gross receipts from a lodger are £7,500 or less per year, no income tax is due under the Rent a Room scheme. If income exceeds £7,500, you pay tax on the excess at your marginal rate (20% basic rate, 40% higher rate). Alternatively you can opt out of the Rent a Room scheme and pay tax on your actual profit (income minus allowable expenses) if that produces a lower tax bill.
Is lodger income classed as property or trade income?
Lodger income is generally treated as property income (Schedule A) rather than trading income. It becomes trading income only if you provide substantial services beyond mere accommodation — such as meals, cleaning, and laundry — in which case it may be treated as a bed-and-breakfast or guest house trade. Property income is not subject to National Insurance; trading income is subject to Class 4 NI.
Does having a lodger affect benefits?
Lodger income can affect means-tested benefits. For Universal Credit, lodger payments exceeding the Rent a Room threshold (£7,500/year) count as income and reduce your award. For Housing Benefit (older claimants not yet on UC), a lodger’s payment is partially disregarded — the first £20/week is ignored. Always report lodger income to DWP to avoid overpayment recovery.
Does lodger income affect my mortgage?
Most mortgage lenders allow you to take in a lodger without permission, as it is not the same as renting out the whole property. However, you should check your mortgage terms. Some lenders may require notification or have restrictions. Inform your buildings insurance provider as well, as some policies require disclosure.
How to declare lodger income on self assessment?
If your lodger income is below £7,500 and you complete a tax return, tick the Rent a Room exempt box in the UK property pages. If income exceeds £7,500, complete the UK property supplementary pages (SA105). Enter gross income, and either claim the Rent a Room deduction or opt out and enter actual expenses. Keep rent receipts, bank statements, and expense records for 6 years.