Rent a Room Scheme Tax Guide: UK 2026/27

The Rent a Room Scheme can make up to £7,500 of gross receipts tax-free in 2026/27 when you let furnished accommodation in your only or main home. The limit is £3,750 for each person when someone else also receives income from letting accommodation in the same property.

The headline allowance is simple, but eligibility, shared income, expenses and the choice of calculation method can materially change the result.

Who can use Rent a Room relief?

The scheme can apply to an owner-occupier or tenant who receives income from furnished residential accommodation in their only or main home. It commonly covers a resident landlord taking in a lodger. A tenant should check that their tenancy and any mortgage, insurance or lease conditions permit subletting.

The accommodation must form part of your residence while it is let. The rules do not normally apply to a property converted into separate flats, accommodation used as an office or other business premises, or a home that is not your only or main residence. Short-term furnished letting in your home can qualify, but all relevant gross receipts must be counted.

2026/27 Rent a Room limits

The £3,750 shared limit is not adjusted to match ownership percentages or how the rent is divided. If you move home during the tax year, qualifying receipts from both homes are combined when testing the limit.

What counts as gross receipts?

Use income before deducting expenses. Include rent and payments for related goods or services, such as meals, cleaning or laundry supplied to the lodger. Keep a schedule that reconciles booking-platform statements, bank receipts and cash payments.

If receipts do not exceed the limit

Qualifying income is normally exempt automatically and no property expenses are deducted against it. You may choose to opt out if the normal profit calculation would be more beneficial—for example, because genuine expenses create a loss that could be used under the property-income rules. The election and loss position should be checked carefully.

If receipts exceed £7,500

You can compare two methods:

• Method A — normal profit: gross receipts less allowable expenses under the ordinary property-business rules.
• Method B — Rent a Room basis: gross receipts less the £7,500 exemption (or £3,750 shared limit), with no separate deduction for expenses.

Method A is the default when receipts exceed the limit. You must elect if you want Method B. Compare both calculations annually: a high-expense year may favour normal profit, while a low-expense year may favour the exemption basis.

Worked example

A homeowner receives £10,000 from a lodger and has £1,800 of allowable costs.

• Normal method: £10,000 − £1,800 = £8,200 taxable profit.
• Rent a Room method: £10,000 − £7,500 = £2,500 taxable amount.

Method B is lower in this example. The result can reverse if costs are much higher, so retain evidence even where you expect to claim the allowance.

Rent a Room versus the £1,000 property allowance

These are separate reliefs and cannot both be used against the same rental income. Rent a Room is specific to furnished accommodation in your main home and has the higher £7,500 limit. The property allowance can apply more broadly but is only £1,000. See our property allowance guide before choosing.

Does taking a lodger affect Capital Gains Tax?

Private Residence Relief usually protects a qualifying main home, but a permanent area used exclusively for letting, structural separation, periods of absence or business use can complicate the position. Taking a lodger while continuing to live in and share the home is different from operating a separate self-contained flat. Keep floor plans and evidence of how rooms were used, and seek advice before sale if the arrangement was substantial.

Other obligations are not removed

Tax relief does not override legal responsibilities. Check landlord insurance, mortgage or lease terms, safety requirements and local rules. Resident landlords should understand whether the occupier is a lodger or tenant and provide appropriate notice and documentation. Right to Rent checks may apply in England.

Records and reporting checklist

1. Record all rent and related service receipts.
2. Confirm that the accommodation is furnished and in your only or main home.
3. Identify whether anyone else receives income from the same property.
4. Keep invoices and calculate normal profit even when comparing the exemption method.
5. Report taxable income through Self Assessment where required and make any election within the relevant time limit.
6. Review the calculation each tax year rather than assuming the previous choice remains best.

For the wider filing process, see our guide to reporting rental income to HMRC.

Official guidance

• GOV.UK: Rent a Room Scheme
• HMRC Property Income Manual: overview
• HMRC: receipts above the exemption limit

This 2026/27 guide is general information, not personal tax or legal advice.