The Rent a Room scheme is available to those who rent part of their only home to a lodger. A lodger is someone who pays to live in your home, sometimes with meals provided, and who often shares the family rooms.
The Rent a Room scheme simplifies declaring your rental income as, rather than declaring each individual expense, you would receive a set allowance of up to £7,500 and only pay tax on any rental income over this value.
The tax exemption is automatic if you earn less than £7,500- you do not need to do anything.
If you earn more than £7,500, you need to complete a self-assessment return.
If your expenses are greater than £7,500, it would be more cost effective for you not to use this scheme and to instead claim the individual expenses.
You would not be able to use the scheme in the following circumstances:
- Your home is converted into separate flats.
- You let unfurnished accommodation in your home.
- You have gone abroad and are renting your home in your absence.
- You are occupying job-related accommodation and letting your former home.
If you charge your lodger for any additional services such as meals, laundry, or telephone costs, you will need to include these in your self-assessment return as part of the rental income received.
Before renting a room in your own home, we would always recommend checking the terms and conditions of your home insurance, mortgage agreement or lease.