Letting a room? £7,500 of it can be tax-free.
The Rent a Room Scheme lets you earn up to £7,500 a year tax-free from a furnished room in your own home. But the allowance isn't always the cheaper route — if your costs are high, claiming actual expenses can win. Put in your figures and see both, side by side. Free, no sign-up.
A guide, not tax advice. The estimated tax applies your chosen band to the taxable amount only — your real bill depends on your full income and allowances, and Scotland uses different bands. The scheme covers a furnished room in your own home, not a whole property let. Nothing you type here leaves your browser.
Two ways to be taxed — you pick the cheaper.
The allowance. Rent a Room gives you a tax-free threshold of £7,500 a year for letting furnished accommodation in the home you live in. If two or more people share the income (a couple, say), it's £3,750 each. The figure is the gross receipts — rent plus any charges for meals, cleaning or laundry.
What it does and doesn't cover. The room must be furnished and in your own main residence while you're living there. The scheme doesn't apply if you let the whole property, if you've moved out (for example letting your old home while you live elsewhere), or if the tenant uses the room as an office or to run a business — those are ordinary rental income, taxed the normal way with the expenses tool above. Lodger arrangements where you share the living space are the classic fit.
Under the threshold. If your room income is at or below your threshold, it's automatically exempt and you usually don't even need to tell HMRC, unless you already complete a tax return.
Over the threshold — method A (relief). You pay tax on the income above the threshold, but you can't also deduct expenses. So £9,000 of income with the £7,500 allowance leaves £1,500 taxable.
Over the threshold — method B (normal). You ignore the allowance and pay tax on income minus your actual allowable expenses, the same as any rental. This wins when your expenses are large — high bills, a big share of repairs, or finance costs.
You choose method B by telling HMRC on your tax return; otherwise the relief applies automatically once you're over the threshold. You can switch year to year as the numbers change, which is exactly why it's worth checking both.
Keep the receipts that make the case.
Whichever method wins this year, you'll want the paperwork. Stead keeps your documents, bills and home records in one place — so when the numbers change, you can switch with the evidence to back it up.