Rent a Room Scheme Calculator

How Rent a Room Scheme Works

The Basics

If you rent out a furnished room in your main home, you can earn up to £7,500 per year completely tax-free. No need to report it or file a tax return for this income.

If You Earn Over £7,500

You have two options:

1. Stay in the scheme: Pay tax only on the amount over £7,500 (no expense deductions)
2. Opt out: Pay tax on profit (income minus allowable expenses)

Allowable Expenses (if you opt out)

• Proportion of utility bills (gas, electricity, water)
• Council tax (lodger's share)
• Insurance (proportion)
• Repairs and maintenance
• Cleaning and laundry
• Furniture and furnishings (wear and tear)
• Advertising for lodger

Rent a Room vs Property Income

Example Calculations

Example 1: Income Under £7,500

Example 2: Income Over £7,500 (Scheme)

Example 3: Opt Out May Be Better

Complete Guide to the Rent a Room Scheme (2025/26)

Current Tax-Free Threshold

The Rent a Room Scheme allows you to earn up to £7,500 per tax year completely tax-free from renting a furnished room in your main home. This threshold has remained at £7,500 since the 2016/17 tax year, when it was increased from the previous limit of £4,250. If you share the rental income with a partner or another person, the allowance is split equally, giving each of you £3,750.

Who Is Eligible?

To qualify for the Rent a Room Scheme, you must meet several conditions. The room you let must be furnished and located in your main residence -- that is, the property where you normally live. It does not matter whether you own or rent the property, provided you have permission from your landlord to sub-let if you are a tenant. You can let the room to a long-term lodger, a short-term guest through platforms such as Airbnb, or even a student during the academic year.

You cannot use the scheme for a separate self-contained flat or annexe within your property, even if it shares the same building. The room must be part of your living space, not a standalone unit with its own entrance, kitchen and bathroom. Running a guest house or bed-and-breakfast as a trade also falls outside the scheme.

How to Opt In or Opt Out

The Rent a Room Scheme applies automatically if your total room rental income is £7,500 or less per year. You do not need to register, inform HMRC, or file a Self Assessment tax return for this income. However, if your income exceeds £7,500, you must file a Self Assessment return and actively choose whether to remain in the scheme or opt out.

To opt out, you complete the property income section of your Self Assessment return and elect to claim actual expenses instead. You must opt out by the first anniversary of 31 January following the tax year in question. For example, for the 2025/26 tax year, you would need to opt out by 31 January 2028. You can switch between the two methods each year depending on which saves you more tax.

Interaction with Other Income and Benefits

Rent a Room income below the £7,500 threshold does not count towards your total taxable income, meaning it will not push you into a higher tax band or affect your personal allowance. However, it is important to note that lodger income can affect means-tested benefits such as Universal Credit, Housing Benefit, and Council Tax Reduction. If you receive any of these benefits, check with the Department for Work and Pensions or your local council before taking in a lodger.

Airbnb and Short-Term Letting Considerations

The Rent a Room Scheme applies equally to short-term lettings through Airbnb, Booking.com, SpareRoom, and similar platforms. The key requirement remains that the room must be in your main home. Many hosts find the £7,500 threshold generous enough to cover occasional weekend or holiday lettings without any tax liability. However, if you rent out your entire property while you are away (rather than just a room while you are present), this does not qualify for the scheme -- it counts as standard property income instead.

Reporting Requirements Summary

Your reporting obligations depend on how much you earn:

• £7,500 or less: No need to tell HMRC. No Self Assessment required for this income.
• Over £7,500 (staying in scheme): File Self Assessment. Pay tax only on the amount exceeding £7,500. No expense deductions allowed.
• Over £7,500 (opting out): File Self Assessment. Deduct allowable expenses from your income and pay tax on the profit. Keep detailed records of all expenses.