The rent-a-room scheme provides a tax incentive for homeowners with a spare room to take in a lodger
Under the scheme, an individual can generate up to £7,500 tax-free per tax year from letting out furnished accommodation in their own home. The home does not have to be owned – the scheme also applies to rented properties. Where the property is owned (or rented) with one or more other people, the rent-a-room limit is halved, so that each person can receive rental income of up to £3,750 tax-free
The room must be in your main residence and furnished not a flat or separate annex and check that you have permission from your mortgage lender or it’s permitted in your lease if you rent. Also check your home insurance.
The rent-a-room exemption is automatic. So, if an individual lets furnished accommodation in their own home and the rental income they receive is less than the rent-a-room limit (£7,500 for one person, or £3,750 for two or more), they do not need to tell HMRC about that income
