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Rent a room scheme

The Rent a Room Scheme lets you earn up to a threshold of £7,500 (from 6 April 2016, £4,250 before that) per year tax-free from letting out furnished accommodation in your home (main or only residence). This is halved if you share the income with your partner or someone else.

You can let out as much of your home as you want.

If your gross receipts from letting are not more than the Rent-a-Room limit of £7,500 (or £3,750), you do not pay tax on your profit. The tax exemption is automatic in this case.

If they’re more than the limit, you may still be able to benefit under the Rent-a-Room Scheme.

You usually count your gross receipts (including rental income for a tax year, any amounts you receive for meals, goods and services, such as cleaning or laundry and any balancing charges) for a tax year.

You must complete a tax return if you earn more than the threshold.

You can then opt into the scheme and claim your tax-free allowance. You do this on your tax return.

You can choose not to opt into the scheme and instead record your income and expenses on the property pages of your tax return.

If you’ve made a loss, for example, it may be better for you to pay tax in the normal way – that is, on your receipts less expenses. You will need to tell HMRC that you want to do this within the time limit.


You can opt in to the scheme at any time if:

·         you’re a resident landlord, whether or not you own your home

·         you run a bed and breakfast or a guest house


You cannot use the scheme if the accommodation is:

·         not part of your main home when you let it

·         not furnished

·         used as an office or for any business – you can use the scheme if your lodger works in your home in the evening or at weekends or is a student who is provided with study facilities

·         in your UK home and is let while you live abroad

·     a home converted into separate flats.

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