Rent a room scheme in 2024

More and more people are looking for ways to increase their income as the cost of living remains high. Some take additional jobs or start a side hustle whilst some take advantage of the rent a room scheme to make some money from their main residential property.

What is the rent a room scheme in the UK?

Under the rent a room scheme, you can rent out a room in your main residential property to a lodger and earn up to £7,500 a year before you will be taxed on the income. The space you let must be fully furnished residential accommodation so you can’t let the area as an office or for other business purposes. If you share your property with another person, your rent a room allowance is also shared, so you can claim up to £3,750 each.

Do I need to tell HMRC if I rent a room out in my house?

If you earn less than £7,500 per year from renting out a room in your house, you don’t need to inform HMRC. Keep records of the income you receive from your lodger though, just in case you need to prove the amounts. If your rental income is more than £7,500, you will need to declare the income on your self-assessment tax return.

Can I claim any expenses from renting out a room?

Under the rent a room scheme, you cannot claim any expenses, so it may be more tax efficient to opt out of the scheme and pay tax on the difference between your rental income and your rental expenses.

Is there any additional allowance if I provide meals or other services?

While you can provide meals, cleaning or other services to your lodger, if you charge for these services, you must add the additional income to the rental income. This could push you over the £7,500 limit which would result in an income tax charge.

How to opt out of the rent a room scheme

To opt out of the scheme, inform HMRC in writing or via the property section of your self-assessment form by 31 January after the end of the tax year in question.

What other rules are in place for the rent a room scheme?

If you rent a room in your property that is mortgaged, you are required to get the permission of your mortgage provider. You will also need the permission from your insurance company.

You cannot use the rent a room scheme if the room you are renting 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

Using rental losses

You can only create a loss if you are having your rental income taxed outside the rent a room scheme – in other words you are offsetting your rental expenses against your rental income. If you have rental losses, these can be offset against rental profits in future years. If you have questions about this, please get in touch.

Can I also use the £1000 property allowance alongside the £7,500 rent a room allowance?

If you are using the rent a room scheme, you can also use the £1,000 property allowance for any income derived from an investment property you may own. However, you cannot claim both allowances on the same property.

If I AirBnB my property, can I claim the rent a room relief?

If the property you are renting using AirBnB is your main residence, you can receive the £7,500 annual rent a room allowance.

Using the rent a room scheme correctly

The rent a room scheme can be a great way to earn up to £625 extra per month without paying any extra tax – if you are prepared to share your home with a lodger. It could get you out of a financial short term fix, meaning you don’t get behind on your mortgage repayments. Give us a call on 01322 250001 or complete our online contact form if you have any questions about using the rent a room scheme to top up your monthly income.