Since April 2016, the amount of tax-free income you can earn from letting a room in your home with the rent a room scheme has increased to £7,500 per annum, or £3,750 if two persons own a property jointly.

You can use the Rent a Room scheme if:

  • you let a furnished room to a lodger
  • your letting activity amounts to a trade, for example, if you run a guest house or bed and breakfast business, or provide services, such as meals and cleaning

You can’t use the Rent a Room Scheme if:

  • 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
  • The room is in your UK home and is let while you live abroad

If your gross receipts from letting aren’t more than the Rent a Room limit of £7,500 (or £3,750 if jointly owned), you don’t pay tax on your profit. If they’re more than the limit, you may still be able to benefit under the Rent a Room Scheme.

Gross receipts include:

  • rental income (before expenses)
  • any amounts you receive for meals, goods and services, such as cleaning or laundry
  • any balancing charges

If your gross receipts are less than £7,500 (or £3,750), you are automatically exempt from tax on that income.

If you’ve made a loss, however, it may be better for you to pay tax in the normal way – that is, on your receipts less expenses.

If your gross receipts are more than £7,500 (or £3,750), you can choose how you want to work out your tax. It can be the actual profit made (rents less expenses) or the gross rents received less the £7,500 (£3,750) allowance; whichever produces the better result.

Please note Tax allowances are impacted by your individual circumstances so do contact us for personal tax advice, we cover the following areas: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

Making the Most of Your Taxable income with the Rent a Room scheme

To find out more about Bourne Accountancy please visit our main website: http://www.bourneaccountancy.co.uk or contact us directly on 0800 680 0413


Paul Johnston

I'm Paul Johnston, owner of Bourne Accountancy, based in Caterham Surrey, offering a broad range of accountancy and specialist tax services to businesses and personal clients. My philosophy is always to do my utmost to provide friendly, courteous and efficient service.

%d bloggers like this: