The rent-a-room scheme is a set of special rules designed to help homeowners who rent-a-room in their home. Homeowners pay no tax on lodger’s rent up to £7,500.
This tax relief applies to the letting/renting of furnished accommodation and is usually used when one bedroom in a home is rented out to a lodger for an extended period. The relief can also be used when rooms in your house are rented out online for short-term lets.
The relief also simplifies the tax and administrative burden for those with rent-a-room income up to £7,500. If the income from letting accommodation in the same property is shared by joint ownership the limit is reduced by half.
The rent-a-room limit includes any receipts for additional services such as meals, laundry or cleaning.
If your gross receipts are more than the £7,500 limit then you can choose between paying tax on the actual profit (gross rents minus actual expenses and capital allowances) or the gross receipts minus the allowance – with no deduction for expenses or capital allowances.