Rent A Room Scheme

Rent A Room Scheme is a tax relief scheme for homeowners

Rent A Room Scheme is a tax relief scheme that allows homeowners or tenants to earn rental income tax-free by letting out furnished accommodation in their main home.

The Rent A Room Scheme can be a useful tax-saving opportunity for homeowners or tenants who let out furnished accommodation in their main home. However, it is important to understand the limits, eligibility criteria, and restrictions associated with the scheme to ensure compliance with tax laws and regulations.



Rent A Room Scheme threshold

The annual tax-free limit for Rent A Room relief remains at £7,500 in the UK for the 2025/2026 tax year. If someone else receives income from letting accommodation in the same property, such as a joint owner, the limit is halved to £3,750 in the UK.

Eligibility

To qualify for Rent A Room Scheme, the accommodation must be furnished and located in the homeowner's or tenant's main home.

The relief applies only to residential tenancies, not to short-term let arrangements.

The homeowner or tenant must also offer the accommodation on a long-term basis.

If the rental income exceeds the annual tax-free limit, the homeowner or tenant must pay tax on the excess amount.

Additionally, the relief cannot be claimed if the homeowner or tenant is receiving income from other rental properties.

Do you have to declare rental income for your spare room?

Yes, you are required to declare rental income income on your taxes. All of the rent received is considered taxable income and must be reported to the tax authorities. However, as a landlord, you are allowed a number of deductions that enable you to offset this rental income.

If you only rent a portion of your home, then all expenses relating to the home must be adjusted based on the square footage of the rental space.

If the rental income exceeds the annual tax-free limit, then tax must be paid on the excess amount.

To calculate the tax payable on rental income exceeding the annual tax-free limit, the homeowner or tenant must deduct any allowable expenses from the rental income and pay tax on the profit at the applicable tax rate.

It is important to keep up-to-date records of your deductions and expenses when you rent out a room.

The Rent a Room Scheme offers a valuable opportunity for UK homeowners and tenants to generate tax-free income by renting out spare rooms in 2025. By understanding eligibility, tax implications, and practical considerations, you can navigate the process confidently and compliantly, maximising your benefits while minimising risks.