What is Rent a Room Scheme?
If a landlord is letting out a furnished room to a tenant in his only or main residence, a special relief is available. This is called ‘Rent a Room’ relief. The Rent a Room Scheme lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your main residence. For the tax year 2017/18, if your gross income from renting a room in your main residence does not exceed £7,500 before deduction of any expenses, your rental income will exempt from tax.
The scheme is only available to those landlords who let a furnished room to a lodger in their own home, or to those who run a guesthouse or bed and breakfast. Short term lettings are also covered under this scheme.
Who is eligible to use this scheme
You can use the scheme if:
You can’t use the scheme if the accommodation is:
How it works
Gross Receipts < £7,500 (2018/19 threshold)
If your gross receipts from letting are less than the Rent-a-Room threshold (2018/19: £7,500), you don’t pay tax on your profit. You are automatically exempt from tax on that income.
Gross Receipts > £7,500 (2018/19 threshold)
If your gross rental receipts are more than the limit, you may still be able to benefit under the Rent-a-Room Scheme. You can choose how you want to work out your tax:
There is no relief for the losses if you use Rent-a-Room Scheme.