If you rent out a room in your own home, you pay no tax on it
Half true. The Rent a Room scheme exempts the first £7,500 a year — but only for furnished accommodation in the home you live in, and the threshold halves if the income is shared.
Half right: there is truth in it, but not all of it. What the score means
Where it circulates. Common advice in chats: “let a room, it does not even count as income”.
Rent a Room does let you take up to £7,500 a year tax-free from letting furnished accommodation in your own home. It comes with four conditions that the advice usually leaves out.
The conditions
The threshold splits. If two people share the income — joint-owner spouses, say — each gets £3,750, not £7,500.
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Your own home only. It cannot be used for a house converted into separate flats — only for accommodation in the home you live in.
The threshold is gross. It is everything the lodger pays you, including charges for bills, cleaning or meals if those are in the price. Expenses do not come off first.
Dealing with HMRC
Below the threshold the exemption is automatic and you need tell HMRC nothing. Above it you must file a tax return. On it you choose: claim the allowance and pay tax on the excess, or work it out the ordinary way — income less expenses — and take whichever is better.
Separately from tax: letting a room may breach your mortgage terms, your home insurance or your own tenancy if you rent. For anyone on benefits, a lodger's payments affect the calculation. Our tax coverage is on the HMRC page.
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