What are the tax implications of renting out a room?

The Rent a Room scheme means you can earn £7,500 per year tax free. Under this scheme, a taxpayer can be exempt from income tax on profits from furnished accommodation in their only or main home if the gross rent they receive is £7,500 or less.

If the rental income exceeds the £7,500 exemption limit, the taxpayer can choose to deduct either the exempt amount or actual expenses incurred in connection with the letting, to arrive at the net assessable pofit for the year.

Where the property is held in joint names, the annual exemption limit is split between each owner. Therefore, the rental income will be assessed equally between yourself and your wife and the annual exemption will also be split equally between the two of you.

The Rent a Room scheme only applies to the furnished residential letting of living accommodation in the taxpayer’s own home. You cannot apply it where any rooms are let as an office or for any other business purpose.

How TaxAssist Accountants can help

If you're renting out a room in your home, or have other property income our accountants can help. For more assistance, call us on 01494 778900 or use our online contact form.

Last updated 3 Jan 2025 | First published 5 Dec 2012

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This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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