What is a rent a room scheme?
Answered 11 March 2026
Here is a comprehensive explanation of the Rent a Room Scheme, drawing on both the legislation and HMRC guidance.
What the law says
The Rent a Room Scheme is provided for in Chapter 1 of Part 7 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005). The scheme provides relief on income from the use of furnished accommodation in an individual's only or main residence.
Who qualifies?
An individual qualifies for rent-a-room relief for a tax year if they:
- have rent-a-room receipts for the tax year (as defined in s.786), and
- do not derive any taxable income other than rent-a-room receipts from the relevant trade, letting or agreement.
What are "rent-a-room receipts"?
Under s.786 ITTOIA 2005, an individual has rent-a-room receipts if:
- the receipts are in respect of the use of furnished accommodation in a UK residence, or in respect of goods or services supplied in connection with that use;
- they accrue during the relevant income period;
- for some or all of that period the residence is the individual's only or main residence; and
- the receipts would otherwise be brought into account as trading income, property income, or income under Chapter 8 of Part 5.
Meals, cleaning and laundry are examples of qualifying goods or services.
The exemption limit
The individual's limit is £7,500 per tax year (s.789(4) ITTOIA 2005), as amended by the Income Tax (Limit for Rent-a-Room Relief) Order 2015 (effective from 2016-17 onwards).
How the relief works
The form of relief depends on whether the individual's total rent-a-room amount (gross receipts, without deduction for expenses) exceeds the individual's limit:
- If receipts do not exceed the limit: the income is not charged to income tax (full relief) unless the individual elects otherwise (ss.791–794).
- If receipts exceed the limit: the individual may elect for alternative methods of calculating income (ss.795–798), whereby only the excess over the limit is taxed.
Shared residence
If another person also receives rents from letting in the same residence, the individual does not meet the "exclusive receipts condition" and their limit is halved to £3,750.
HMRC guidance / practice
Overview
The scheme applies to income from providing furnished residential accommodation in the taxpayer's only or main residence — for example, taking in a lodger. The rules either exempt rental income or tax it on a more favourable basis.
What income is covered?
The scheme applies to income from providing furnished accommodation (or goods and services connected with it) in the individual's only or main residence. This covers:
- Income from lodgers;
- Bed and breakfast or guest house businesses, provided the house is also the individual's only or main residence and the normal rent-a-room conditions are met.
It applies whether the residence is owned or rented.
Gross receipts
For the purposes of the scheme, gross receipts include not only rents but also payments for goods or services (such as meals, cleaning, laundry) provided in connection with the letting.
Expenses
If the full exemption or the alternative basis applies, the taxpayer cannot claim any expenses of the letting. Expenses can only be deducted if the individual opts out of the scheme.
What is excluded?
The scheme does not apply to rooms let as an office or for other business purposes. However, it does apply to genuine lodgers who study at home or do some business work at home in the evenings or at weekends.
Trading vs property income
The scheme can apply to income assessable as either trading income or property income. Where the letting activity amounts to a trade, it is treated as a rent-a-room trade (not a "relevant trade" for the purposes of the trade and property income allowances).
Further information
HMRC's self-assessment help sheet HS223 provides further guidance on the rent-a-room allowance.
Citation sources
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
Part 7 Income charged under this Act: rent-a-room and qualifying care relief Chapter 1 Rent-a-room relief Introduction Person who qualifies for relief 785 1 An individual qualifies for rent-a-room relief for a tax year if the individual— a has rent-a-room receipts for the tax year (see section 786), and b does not derive any taxable income other than rent-a-room receipts from a relevant trade, letting or agreement. 2 “ Taxable income ” means receipts or other income in respect of which the indiv
The scheme applies to income from providing furnished accommodation (or from providing goods and services in connection with that accommodation) in the individual’s only or main residence. This obviously covers income from lodgers. It may also be applied to bed and breakfast or guest house businesses (assessable as trading income) provided that: the house in which the business is carried on is also the individual’s only or main residence, the normal rent-a-room conditions are met. Rent-a-room ap
Rent-a-room applies to income from providing furnished residential accommodation in the taxpayer’s only or main residence. For example, a taxpayer may benefit where they take in a lodger. The rules either exempt rental income or tax it on a more favourable basis. Under the rent-a-room scheme a taxpayer can be exempt from Income Tax on income from furnished accommodation in their only or main residence if the gross receipts they get (that is, before expenses) are £7,500 or less, see PIM4012. But
Part 7 Income charged under this Act: rent-a-room and qualifying care relief Chapter 1 Rent-a-room relief Relief if amount does not exceed limit Full rent-a-room relief: introduction 791 Sections 792 to 794 (which give the full form of rent-a-room relief) apply if— a an individual qualifies for rent-a-room relief for a tax year, b the individual's total rent-a-room amount for the tax year does not exceed the individual's limit for the tax year, and c no election by the individual under section 7
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
Part 7 Income charged under this Act: rent-a-room and qualifying care relief Chapter 1 Rent-a-room relief Basic definitions Meaning of “rent-a-room receipts” 786 1 For the purposes of this Chapter an individual has rent-a-room receipts for a tax year if— a the receipts are in respect of the use of furnished accommodation in a residence in the United Kingdom or in respect of goods or services supplied in connection with that use, b they accrue to the individual during the income period for those
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
Part 7 Income charged under this Act: rent-a-room and qualifying care relief Chapter 1 Rent-a-room relief Individual's limit Exclusive receipts condition 790 1 An individual meets the exclusive receipts condition for a tax year if, for each rent-a-room residence of the individual, no receipts accrue to any other person during any relevant period in respect of— a the use of residential accommodation (whether furnished or not) in the residence, or b goods or services supplied in connection with th