The Rent a Room Scheme

The Rent a Room Scheme lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home. 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. How it works The tax exemption is automatic if you earn less than £7,500. This means you do not need to do anything. If you earn more than this you must complete a tax return . 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. More information Read the Rent a Room helpsheet for more detailed information on how to complete the form, and when it makes sense to opt out of the scheme. Eligibility 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 for homes converted into separate flats.

Your lodger's tenancy type

The way you share your home with a lodger affects what kind of tenancy they have. This in turn affects their rights and how you can end the tenancy. Your lodger is an excluded occupier Your lodger is likely to be an excluded occupier if: they live in your home you or a member of your family share a kitchen, bathroom or living room with them In this case, you only have to give them ‘reasonable notice’ to end the letting - and you will not have to go to court to evict them. Reasonable notice usually means the length of the rental payment period. For example, if rent is paid monthly, you should give one month’s notice. Your lodger has basic protection Your lodger is likely to be an occupier with basic protection if: they live in your home they do not share any living space with you or your family If your lodger will not leave when you ask them, you’ll need to get a court order to evict them . The charity Shelter has advice on excluded occupiers and occupiers with basic protection . The length of the let A tenancy or a licence can be either: periodic - run indefinitely from 1 rent period to the next fixed term - last a set number of weeks, months or years If you do not agree the length of a let, it will automatically become a periodic let. Licences can be open-ended for informal arrangements, like allowing a friend to stay on an as-and-when basis.

Rent You can charge what you want for rent but should agree the amount with your tenant beforehand. You can also ask for a deposit and you can accept Housing Benefit for rent. You must provide a rent book for tenants who pay weekly. Council Tax You will be responsible for Council Tax and can include part of the cost in the rent you charge. You must tell your council if having a tenant means you’re no longer entitled to a single person discount. If you’re unsure who should pay Council Tax, check with your local council. Utility bills If you pay the utility bills for the entire house, you can include a charge in the rent or install pre-paid meters. You can only charge the amount you’ve paid for gas and electricity plus VAT or you could face civil proceedings. Read Ofgem’s rules on the resale of gas and electricity for more information. Income Tax Income Tax is payable on rental income you receive. If you’re not in the Rent a Room scheme, you’ll be charged Income Tax on any rental income you get after business letting expenses . Examples of business expenses include: insurance maintenance repairs (but not improvements) utility bills If you’re in the Rent a Room Scheme , you’ll pay Income Tax differently. Capital Gains Tax You may have to pay Capital Gains Tax when you sell your home if: you let out all or part of it you’ve taken in more than 1 tenant or lodger at a time However, you may be entitled to Private Residence Relief and Letting Relief . Deposits Resident landlords are not legally required to protect tenants’ deposit with one of the government-approved schemes. Your local council may guarantee rent for a potential tenant who can’t afford a deposit. You may have to pay other taxes if you run a bed and breakfast, or provide meals or cleaning services for guests. Contact HM Revenue and Customs for more information.

How to end an excluded tenancy or licence If your lodger is an excluded occupier , you only need to give them ‘reasonable notice’ to quit. Usually this means the length of the rental payment period – so if your lodger pays rent weekly, you need to give 1 week’s notice. The notice does not have to be in writing. You can then change the locks on your lodger’s rooms, even if they’ve left their belongings there. You must give their belongings back to them. How to end a non-excluded tenancy or licence If your lodger is an occupier with basic protection , you must serve them a written ‘notice to quit’. The notice period will depend on the tenancy or agreement, but is often at least 4 weeks. If your lodger does not leave, you’ll need to get a court order to evict them . Your lodger ends the tenancy Your lodger can end the tenancy by giving you notice. They cannot do this during the fixed term of the tenancy, unless there’s a break clause. The amount of notice they need to give depends on the tenancy agreement, if there is one. Otherwise, it’s usually at least 4 weeks (if they pay weekly) or 1 month (if they pay monthly). You and your tenant can end a tenancy at any time if you both agree. Change of ownership If you stop living in your home, the tenants can still stay there, but their tenancy type may change to reflect that you no longer live there. If you sell your home and the new owner plans to live in the property as a resident landlord, they must: give notice to a tenant within 28 days that they intend to live there move in within 6 months of the sale Until the new owner moves in, tenants will have more protection through tenancy laws, because during this time there’s no resident landlord. Their rights will depend on when they moved in. Find out about tenants’ rights in ‘Private renting: tenancy agreements’ . If you die, a tenancy will usually continue as though you were still resident, until someone else takes ownership.

Houses in Multiple Occupation

Your property may be classed as an House in Multiple Occupation ( HMO ) if you let rooms to more than 2 people. There are extra safety requirements and standards for HMOs and you’ll often need a licence.

Rent a room in your home

Becoming a resident landlord

You’re a resident landlord if you let out part of a property which is your only or main home.

If you only occasionally rent out part of your home (for example through short-term rental apps), check if you need to tell HMRC about this income.

If so, you’ll have certain rights and responsibilities:

you’re responsible for keeping the property safe and in good repair
a tenant or lodger doesn’t have the right to challenge the agreed rent
you may be able to earn £7,500 per year tax-free under the Rent a Room Scheme
you can give less notice to end a letting than if you rented out the property as a whole

This page is also available in Welsh (Cymraeg).

Ask potential tenants or lodgers for references and follow them up before signing any agreement. Read the guide about letting rooms in your home for more information.

View a printable version of the whole guide

Rent a room in your home

Becoming a resident landlord

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Rent a room in your home

Becoming a resident landlord

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