What is the Rent A Room Scheme?

The Rent A Room scheme lets you earn £7,500 tax-free when renting out a furnished room in your home. Under the Rent A Room scheme, a taxpayer can be exempt from income tax on profits received from renting part of their only or main home if the gross receipts (that is, before expenses) are £7,500 or less.

If the receipts exceed the £7,500 exemption limit, you can choose to be taxed on the gross receipts above the exemption as an alternative to preparing the standard profit and loss account. This may, in some cases, be more favourable if the rents only slightly exceed the exemption limit to save on administration costs of preparing the accounts.

Assuming you own the property with your wife, you cannot both benefit from the exemption limit of £7,500. If more than one person is letting a room in the same home, the limit is reduced to £3,750 for each person receiving rental income.

The 'Rent A Room' scheme only applies to ordinary lettings of living accommodation in the taxpayer's own home. You cannot apply it where the rooms(s) are let as an office or for other business purposes.

You should ensure that when claiming 'Rent A Room' you calcuate that this is more beneficial than establishing your profit after expenses, as you have the a choice of which method to use.

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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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