Tax Glossary

Rent a Room scheme

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Last updated on:
March 17, 2024

The Rent a Room scheme offers a unique tax benefit for homeowners or tenants who decide to rent out furnished accommodation within their main residence. Essentially, the scheme allows you to receive up to £7,500 annually in rent without needing to pay any tax on this income. This threshold is halved if the income is shared with a partner or someone else.

Here are key points to remember about the Rent a Room scheme:

  • The scheme is automatically applied if your rental income from the room is below or equal to the £7,500 threshold.
  • If you earn more than the threshold, you must complete a Self Assessment tax return; you can then opt to claim the tax-free allowance under the Rent a Room scheme. Alternatively, you can choose to not opt into the scheme and instead record your income and expenses in the traditional way.
  • The scheme is designed to encourage affordable rented accommodation, offering a tax incentive for those who have spare rooms.
  • You're still eligible for the scheme even if you rent out the room for a short period, such as through holiday lets.
  • However, the Rent a Room scheme cannot be used for homes converted into separate flats rented out. It only applies to a room or rooms rented out within your main residence where you also live.

To utilise the scheme, ensure that the accommodation is furnished, and that the property qualifies as your main residence for at least part of the letting period. This scheme simplifies the tax process for small-scale landlords and can be a beneficial way to utilize spare rooms in your home.

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