How much can I earn rent a room before paying tax?
Answered 11 March 2026
Rent-a-Room Relief: Tax-Free Threshold
What the law says
The tax-free limit under the Rent-a-Room scheme is £7,500 per tax year. This amount was set by statutory instrument with effect from the 2016-17 tax year onwards (increased from the previous £4,250).
However, the limit is halved to £3,750 if another person also received income from letting accommodation in the same property during the same period — i.e. if you do not meet the "exclusive receipts condition".
If your gross rent-a-room receipts stay at or below the applicable limit (£7,500 or £3,750), the income is fully exempt from tax — no return is required for that income.
HMRC guidance / practice
If your receipts exceed the limit, you have two options for calculating your tax:
- Method A: Pay tax on actual profit (rents received minus allowable expenses), calculated in the normal way for a rental business.
- Method B: Pay tax on gross receipts minus the £7,500 (or £3,750) exemption limit, with no deduction for expenses.
You can choose whichever method results in the lower tax bill.
Further detail is available in HMRC's self-assessment help sheet HS223.
In summary: You can earn up to £7,500 (or £3,750 if sharing the letting income with someone else) tax-free from renting a furnished room in your home. Above that threshold, you pay tax only on the excess.
Citation sources
The provision of accommodation in the taxpayer’s only or main home can sometimes amount to a trade, for example, if the taxpayer runs a guest house or a bed and breakfast business. This sort of income should not be included in the UK Property (SA105) pages of the return but instead included in the Self employment pages. Help Sheet HS223 explains to the taxpayer how the Self employment pages should be completed to take account of the Rent a Room scheme. These cases can be identified by the entry
Part 7 Income charged under this Act: rent-a-room and qualifying care relief Chapter 1 Rent-a-room relief Individual's limit The individual's limit 789 1 For the purposes of this Chapter an individual's limit for a tax year depends on whether the individual meets the exclusive receipts condition for the tax year (see section 790). 2 If the individual does, the individual's limit for the tax year is the basic amount for the tax year. 3 If the individual does not, the individual's limit for the ta
The rent-a-room scheme provides two ways to work out the tax when receipts are above the exemption limit of £7,500 (or £3,750 if someone else also got income from the same property in the same period). The customer can choose which of the following two methods is best for them: Method A: paying tax on the profit they make from letting worked out in the normal way for a rental business (that is, rents received less expenses). Method B: paying tax on the gross amount of their receipts (including r
The rent-a-room scheme applies if individuals let a furnished room to a lodger, and the letting activity amounts to a trade – if the activity does not amount to a trade then the rental receipts will be considered property income. Rent-a-room trades are not relevant trades for the purposes of the trade and property income allowances. However, individuals can opt for the rent-a-room scheme not to apply in some instances and to calculate profits by deducting expenses in the normal way. If an indivi
Citation, commencement and effect 1 1 This Order may be cited as the Income Tax (Limit for Rent-a-Room Relief) Order 2015 and comes into force on 13th August 2015. 2 The amendment made by article 2 has effect for the tax year 2016-17 and subsequent tax years. The individual’s limit for rent-a-room relief 2 In section 789(4) of the Income Tax (Trading and Other Income) Act 2005 for “£4250” substitute “£7500”. Mel Stride George Hollingbery Two of the Lords Commissioners for Her Majesty’s Treasury