Rent a room scheme
What is the rent-a-room scheme?
The rent a room scheme allows live in landlords to earn up to £7.500 in room rental, income tax free every year as long as they let furnished accommodation to lodgers within their own home, giving you the opportunity to earn £625 a month tax free.
Do I have to register?
- If you earn £7,500 or less, then the tax exemption is automatic and you don’t have to do anything unless you normally fill in a tax return then declare the exemption.
- If you earn over £7,500 you pay tax on any income over this amount, if this applies to you just contact your local tax office and complete a yearly tax return and claim your £7,500 allowance.
What if I have rooms in other houses where I don’t live?
In this situation you would not join the rent a room scheme and it would be considered as a business and you would pay tax as normal by contacting your local tax office and completing a tax return. Rent a room scheme also does not apply to studio flats.
Can I rent rooms in my rental property where I live?
Yes you can take advantage of the rent a room scheme regardless of whether you’re a home owner or renting the property, however if you are renting the property, you should check whether your lease allows you to take in a lodger or contact your landlord.
What if I offer additional services?
If you were to charge for additional service like providing Meals, Sky TV, Laundry Services etc, you will need to add the payments you receive to the rent, to work out the total income. If you get more than £7,500 a year in total, you will have to pay tax.
What’s the disadvantage to the scheme?
The rent a room scheme will benefit most people with the only main disadvantage to the scheme being you can’t claim any expenses relating to the letting for example, wear and tear, insurance, repairs, heating and lighting.
What if I don’t want to join the scheme?
If you don’t want to join the scheme you pay tax on your rental earnings as normal by contacting your local tax office and completing a tax return form, but by doing this you won’t benefit from the £7,500 tax free benefit but it does mean you will be able to claim for expenses like:
- Wear and tear
Do I need to keep records?
Always keep a record of any rental income and expenses for at least 6 years, keeping everything together in a folder.
More information about the rent a room scheme on GOV.UK.
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