Spare rooms are working harder than ever. Lodgers, students, Monday-to-Friday professionals, Airbnb guests in town for the weekend — more households are turning an empty room into steady extra income.
What many people do not realise is how generously HMRC treats this particular kind of income. Rent-a-room relief lets you receive up to £7,500 per tax year from letting furnished accommodation in your own home before any tax is due. It is one of the most generous allowances in the UK tax system — and one of the least understood.
What the Relief Covers
The relief applies when you let furnished accommodation in your main home — the place you actually live. That includes:
- a long-term lodger renting a spare room
- students or Monday-to-Friday working lets
- short-term guests, including through Airbnb, while it remains your home
- bed-and-breakfast style arrangements — though charges for meals, cleaning or laundry count towards the £7,500 too
What It Does Not Cover
The relief has firm edges, and this is where people get caught out. It does not apply to:
- letting a whole property while you live somewhere else
- unfurnished lettings
- rooms let as office or business space rather than living accommodation
- a separate buy-to-let — that is normal property income, with normal rules
Under £7,500: Usually Nothing to Do
If your total receipts from the room — rent plus any extras — stay at or below £7,500 in the tax year, the exemption is automatic. In most cases there is nothing to report and no tax return needed for this income alone. One important halving: if someone else also receives income from the same letting — a partner or joint owner, say — each of you gets £3,750 instead.
Over £7,500: You Choose How to Be Taxed
Go over the limit and you will need a Self Assessment return — but you get a choice of two methods:
- the normal method: pay tax on receipts minus your actual expenses
- the rent-a-room method: pay tax only on receipts above the flat £7,500, with no expense claims
For most people with a lodger, the rent-a-room method wins comfortably, because the £7,500 is far more than the real costs of letting a room. One thing you cannot do is stack allowances: the £1,000 property allowance cannot be used on the same income as rent-a-room relief.
HMRC Can See This Income Too
If the room is let through a platform such as Airbnb, remember that online platforms now report host income to HMRC routinely. That is no reason to worry when you are inside the relief — but it is a good reason to keep simple records of what you received, even in years when no tax is due. If HMRC ever asks, the answer is a bank statement away.
The Bottom Line
Rent-a-room relief is a genuinely generous deal: up to £7,500 a year, tax-free, often with no paperwork at all. The only real task is knowing which side of the limit you are on — and that just takes a running record of what the room brings in.
123Tax makes that effortless: send the month’s rent and any property paperwork over WhatsApp and your records build themselves — so if the room ever pushes you into needing a return, everything is already in order.