Rent‑a‑Room Relief is an HMRC scheme that allows individuals to earn up to £7,500 per year tax‑free from letting out furnished accommodation in their only or main residence, typically to a lodger. The relief applies whether you own or rent your home and is designed to simplify taxation. To qualify, the room must be furnished and form part of the property you occupy as your only or main residence at the time of the letting, and the exemption applies automatically if gross receipts stay within the annual limit.
What qualifies?
The accommodation must be:
- Furnished, and
- In your only or main residence at the time it is let
- Part of your main home when you let it — if it is not part of your main home, the relief cannot be used
Rent‑a‑Room Relief only applies if the furnished accommodation is in your “only or main residence”. This means HMRC look at where you normally live, not where you own property.
What if my rental income exceeds £7,500?
If your income exceeds £7,500 you can still use the Rent‑a‑Room Relief. You will be taxed on income above £7,500.
Taxable amount = Gross receipts − £7,500
- You cannot claim any expenses.
- HMRC treat the £7,500 as a flat deduction.
- This is worthwhile if your actual expenses are less than £7,500.
What if my rental expenses are more than £7,500?
If your expenses exceed £7,500, you normally should NOT use Rent‑a‑Room Relief and should instead choose to be taxed on the normal property income basis.
What if I live multiple places?
Rent‑a‑Room Relief is only available on your “main residence”. HMRC do not publish an explicit test, but accepted tax practice and tribunal cases consider several factors:
Where you habitually live
- How many nights you spend there each week/month
- Where you keep your personal possessions
- Where your day‑to‑day life is based
Administrative ties
- Where you are registered to vote
- Address on your driving licence
- Address on bank accounts, HMRC, GP/dentist
- Utility accounts in your name
Practical lifestyle indicators
- Where you receive most mail
- Where you sleep most nights
- Where you keep clothes, toiletries, personal items
Family / Relationship links (if applicable)
- Where your children live or spend most time
- Where a spouse/partner resides
If you would like to discuss this in more detail relating to your business, please feel free to book a free online meeting.