Official HMRC research published in December 2024 reveals that Rent-a-Room Relief users find the scheme simple and effective, with most having no improvements to suggest.
Yet thousands of eligible homeowners still aren’t claiming their entitled £7,500 tax-free income.
Are you one of them?
With living costs continuing to squeeze household budgets and mortgage rates staying elevated.
More UK homeowners are discovering a government-approved way to earn extra income without paying a penny in tax.
The Rent-a-Room Scheme allows you to pocket up to £7,500 per year completely tax-free simply by renting out a spare room in your home.
What makes this even more compelling? Recent government research confirms this isn’t just another complicated tax scheme – it actually works exactly as intended, with users praising its simplicity.
HMRC research confirms: This tax relief actually works
In December 2024, HMRC published the findings of an independent evaluation of Rent-a-Room Relief, conducted by research firm Ipsos.
The results should encourage anyone sitting on the fence about taking in a lodger.
Key findings from HMRC research:
- Most users who know about the relief FOUND IT SIMPLE to use
- The majority had NO IMPROVEMENTS to suggest
- Users report straightforward application and claiming processes
- The scheme works as designed for its target audience
- Primary motivation is generating additional income – and it delivers
This official stamp of approval from HMRC’s own research should give you confidence: this isn’t a loophole or a complicated scheme that might disappear.
It’s a well-established, government-backed tax relief that has proven its worth for over 30 years.
The bottom line: If you have a spare room, you could be missing out on up to £7,500 of tax-free income that’s yours for the taking.
What is rent a room relief? (2025/26 tax year)
Rent-a-Room Relief is a UK government tax scheme that allows residents to receive tax-free rental income when they let out furnished accommodation in their main home.
Established in 1992, it’s one of the most generous and accessible tax reliefs available to ordinary taxpayers.
For the 2025/26 tax year (6 April 2025 to 5 April 2026), the annual Rent-a-Room limit remains at £7,500.
This means you can earn up to £7,500 from renting out a room without paying any income tax or National Insurance contributions on that money.
Why this matters in 2025/26:
- At the basic rate of tax (20%), earning £7,500 tax-free is equivalent to earning £9,375 in gross salary from employment.
- At the higher rate (40%), it’s equivalent to £12,500 gross income.
That’s serious money – and it could cover your annual council tax, energy bills, or even mortgage payments.
Important for couples:
If you jointly own the property with someone else (such as a partner or spouse), the £7,500 limit is split equally between you, giving you each £3,750 of tax-free income.
Who can claim rent a room relief? (You probably qualify)
One reason HMRC’s research found users satisfied with the scheme is its broad accessibility. You don’t need to be a professional landlord or own your home outright.
Eligibility requirements for 2025/206
You can claim if you:
- Rent out furnished accommodation in your only or main residence in the UK
- Live in the property at the same time as your lodger (shared occupancy)
- Provide at least one furnished room
This includes:
- Homeowners with a mortgage
- Homeowners who own outright
- Tenants (with landlord’s written permission to sublet)
- Leaseholders
- Housing association or local authority tenants (with permission)
Types of letting that qualify
The flexibility of this scheme is another reason it works so well:
- Long-term lodgers (the most common use according to HMRC research)
- Short-term letting through Airbnb or similar platforms
- Providing meals, cleaning, or laundry services along with accommodation
- Multiple lodgers sharing your home
REMEMBER: All income from these services counts towards your £7,500 limit. If you charge £600 monthly rent plus £50 for utilities, the full £650 counts towards the threshold.
When you cannot use the scheme
The scheme doesn’t apply if:
- The room is used as an office or for business purposes only
- You run a guest house or bed and breakfast as a registered trade
- The accommodation is unfurnished
- You don’t live in the property yourself
- The property isn’t your main residence
How much money are you actually missing out on?
Let’s put this in real-world terms. Many eligible homeowners don’t realise just how much they’re leaving unclaimed.
The £7,500 reality check for 2025/26:
Scenario 1: Basic rate taxpayer (20%)
- Tax-free income: £7,500
- Equivalent gross salary: £9,375
- Tax saved: £1,875 per year
Scenario 2: Higher rate taxpayer (40%)
- Tax-free income: £7,500
- Equivalent gross salary: £12,500
- Tax saved: £5,000 per year
Over 5 years a higher rate taxpayer could save in the region of £25,000 in tax.
According to data from the lettings market, between 2021 and 2024, the number of homeowners taking in lodgers surged by 89%. This isn’t surprising when you see the numbers above.
Monthly income example for 2025/26
Here’s what £7,500 per year looks like in monthly terms:
- £625 per month = Exactly at the tax-free limit
- £550 per month = £6,600 per year (well within limits)
- £700 per month = £8,400 per year (over limit, but still benefits apply)
Even if you charge more than £7,500 annually, you still benefit from the relief – you’ll just need to report it and choose your calculation method.
What happens if you earn more than £7,500 (Still worth it)
Don’t worry if your rental income exceeds £7,500 – you haven’t lost the relief. You simply need to report it to HMRC and choose the most tax-efficient calculation method.
Your two options when income exceeds £7,500
Method A: Pay income tax on actual profit
Calculate your rental profit by deducting all allowable expenses from your total rental income. You then pay tax only on the profit.
Allowable expenses include:
- Repairs and maintenance to the let room
- A proportion of utility bills (gas, electricity, water)
- A proportion of council tax
- Contents insurance
- Cleaning costs
- Wear and tear replacements (furniture, carpets, etc.)
Usually best if you have high expenses.
Method B: Use the rent a room relief
The first £7,500 of your rental income is tax-free, and you pay tax only on the amount above £7,500. However, you CANNOT claim any expenses with this method.
Normally best if your expenses are low or you want simplicity.
You can change between methods from year to year, always choosing whichever saves you the most. Just notify HMRC by 31 January following the end of the tax year.
How to claim rent a room tax relief
Remember those HMRC research findings? Users praised the scheme’s simplicity. Here’s why.
If your income is below £7,500 (most users)
✓ Zero paperwork required
✓ No need to notify HMRC
✓ No Self Assessment tax return needed
✓ No tax to pay
✓ The relief applies AUTOMATICALLY
You literally don’t need to do anything. Just collect your rent and enjoy your tax-free income.
This is why HMRC research found users so satisfied – for most people, there’s nothing to claim, nothing to fill in, and nothing to worry about.
If your income exceeds £7,500
Even then, it’s quite straightforward:
- Register for self assessment if not already registered
- Deadline: 5 October following the tax year end
- For 2025/26 tax year: Register by 5 October 2026
- Complete your self assessment tax return
- Deadline: 31 January following the tax year
- For 2025/26: Deadline is 31 January 2027
- Declare your rental income in the property section
- Choose your calculation method (method A or B). The return will calculate which saves you more.
Key deadlines for 2025/26 tax year
- Tax Year: 6 April 2025 – 5 April 2026
- Registration Deadline (if new to SA): 5 October 2026
- Tax Return Deadline: 31 January 2027
Why so many people miss out (and how to avoid it)
Despite HMRC research showing the scheme works well, thousands of eligible homeowners still don’t claim it. Here are the main reasons – and how to overcome them.
MYTH 1: “IT’S TOO COMPLICATED”
REALITY: If you earn under £7,500, there’s literally zero paperwork. HMRC research confirms users find it simple. Even if you exceed the threshold, it’s just one section in a Self Assessment return.
MYTH 2: “I DON’T WANT THE HASSLE OF A LODGER”
REALITY: You control who you let to, what rent you charge, and the house rules. Many people rent to professionals, students, or friends. With platforms like SpareRoom, finding suitable lodgers is easier than ever.
MYTH 3: “I’M NOT SURE I’M ELIGIBLE”
REALITY: If you live in a property in the UK and have a spare furnished room, you almost certainly qualify – whether you own or rent (with permission).
MYTH 4: “THE £7,500 LIMIT ISN’T WORTH IT”
REALITY: £7,500 tax-free equals £9,375 gross income for basic-rate taxpayers, or £12,500 for higher-rate taxpayers. That’s significant money that could cover bills, mortgage payments, or boost savings.
Common mistakes that cost people money
- Not declaring income over £7,500
- Even if you plan to use the relief, you must declare income above the threshold
- Late declaration means penalties
- Mixing up the methods
- You can’t claim expenses if using Method B (Rent-a-Room Relief)
- Choose one or the other
- Missing notification deadlines
- Want to switch methods? Tell HMRC by 31 January after the tax year ends
- Forgetting the limit is per property
- If you have three lodgers paying £200 each monthly, that’s £7,200 total
- All counting toward your single £7,500 limit
- Not getting proper permission
- Tenants must get written permission from landlords
- Homeowners should notify mortgage lenders and insurers
The numbers don’t lie: Why this relief is essential in 2025/26
With the cost-of-living crisis continuing and household budgets under pressure.
Rent-a-Room Relief represents one of the most accessible ways for ordinary people to boost their income without increasing their tax burden.
Current UK financial context (2025/26)
- Personal tax allowance remains frozen at £12,570 until 2028
- Average UK rent continues to rise, making lodger income valuable
- Mortgage rates, while stabilising, remain higher than pre-2022 levels
- Energy bills remain elevated compared to historical norms
- Council tax continues to increase across most local authorities
A homeowner earning £7,500 tax-free from a lodger could use this to cover:
- Average UK annual energy bills (approximately £2,000-£3,000)
- Plus average council tax (approximately £2,000)
- Plus home insurance and maintenance (approximately £1,000-£1,500)
- Plus groceries contribution (balance)
That’s most of your essential household costs covered by one tax-free income stream.
What the HMRC research tells us about success
The December 2024 HMRC evaluation, conducted independently by Ipsos, surveyed actual users of Rent-a-Room Relief.
Their findings reveal what makes this scheme work.
User satisfaction: What people actually said
- Simplicity wins: Users consistently reported the relief was straightforward to understand and use
- No improvement needed: When asked what could be better, most users said nothing
- Purpose fulfilled: The primary motivation (additional income) was consistently achieved
- Long-term usage: The research found mostly traditional longer-term lodger arrangements, showing sustainable use
- Accessibility: Users came from diverse backgrounds, proving it’s not just for property professionals
What this could mean for you
This isn’t anecdotal evidence or marketing spin – it’s official government research confirming:
- The scheme delivers what it promises
- It’s user-friendly (not bureaucratic)
- People who use it are satisfied
- It’s been tested and validated by independent researchers
TRANSLATION: If you’re hesitating because you think it might be complicated or not worth it, the evidence indicates otherwise.
Taking action: Your step by step guide for 2025/26
Ready to stop missing out? Here’s exactly what to do.
STEP 1: CHECK YOUR ELIGIBILITY (TAKES 2 MINUTES)
Ask yourself:
- Do I live in the property?
- Do I have a spare furnished room?
- Is this my main residence in the UK?
- If renting, do I have landlord permission (or can I get it)?
Four yes answers? You’re eligible.
STEP 2: GET PERMISSIONS (TAKES ABOUT 1-2 WEEKS)
If you own:
- Contact your mortgage lender
- Contact your home insurer
If you rent:
- Get written permission from your landlord
If leasehold:
- Check your lease terms
STEP 3: SET YOUR RENT (TAKES AROUND 30 MINUTES)
Research local rental rates using sites like SpareRoom or Rightmove.
Consider:
- Do you want to stay under £7,500 annual limit (£625/month) for zero paperwork?
- Or charge more and choose your tax method?
- What’s included (bills, WiFi, cleaning)?
STEP 4: FIND A LODGER (TAKES ROUGHLY 2-4 WEEKS)
Popular platforms include:
- SpareRoom.co.uk
- Rightmove.co.uk
- OpenRent.com
- Local Facebook groups
STEP 5: SET UP PROPERLY (TAKES 1 DAY)
- Create a lodger agreement (free templates available online)
- Discuss house rules and expectations
- Set up rent payment method (standing order recommended)
- Exchange contact details and move-in dates
STEP 6: TRACK YOUR INCOME (ONGOING)
Even though income under £7,500 requires no reporting, keep records:
- Monthly rent received
- Any expenses you incur
- Dates of occupancy
If you exceed £7,500, you’ll need these for your tax return.
Important considerations for 2025/26
Impact on benefits
If you receive means-tested benefits, note that lodger income may affect your entitlement even though it’s tax-free.
The income typically still counts for:
- Universal Credit
- Tax Credits
- Housing Benefit
- Pension Credit
Contact the relevant benefit authority before taking in a lodger to understand the impact.
Council tax responsibility
You remain responsible for council tax as the property owner/main tenant. However, you can include a contribution towards council tax in the rent you charge (this counts toward your £7,500 limit).
Multiple properties during 2025/26
Moving house during the tax year? If you rent out rooms in both your old and new main residence, add the total rent from both properties. The £7,500 limit applies to the combined total.
Couples and joint ownership
For couples who jointly own the property:
- You get £3,750 each (total £7,500)
- This applies even if only one person deals with the lodger
- Both can benefit from the relief
QUIRK IN THE RULES: If three or more people own the property, you each still get £3,750 relief – so three owners could potentially shield £11,250 in total!
FAQ’s about rent a room relief 2025/26
Q: Do I need to tell HMRC if I earn less than £7,500?
A: No. If your gross rental income is below £7,500 (or £3,750 for joint owners), the relief applies automatically. No notification or tax return is required.
Q: Can I claim if I’m currently a tenant?
A: Yes, as long as you have written permission from your landlord to sublet. Make sure to get this in writing before taking in a lodger.
Q: Does this work with Airbnb and short-term lets?
A: Yes, the relief applies to both long-term lodgers and short-term lettings through platforms like Airbnb, provided you live in the property at the same time as your guests.
Q: What exactly counts towards the £7,500 limit?
A: All payments count, including base rent plus any charges for meals, utilities, cleaning, laundry services, or other services you provide.
Q: Can I change my calculation method each year?
A: Yes, you can switch between Method A (actual profit) and Method B (relief on excess) each year. Just notify HMRC by 31 January following the end of the tax year.
Q: I have two lodgers paying £4,000 each – how does this work?
A: The combined total (£8,000) exceeds the £7,500 threshold, so you’d need to declare the income and choose your calculation method. But the first £7,500 can still be shielded from tax using Method B.
Q: What if my expenses are higher than my rental income?
A: Using Method A, you can create a loss that may be carried forward against future rental profits. You cannot create a loss using Method B.
Q: Does this relief affect my Personal Allowance?
A: No. Rent-a-Room Relief is completely separate from your £12,570 Personal Allowance. You keep both.
Getting professional help when you need it
While HMRC research shows the scheme is simple for most users, complexity can arise when:
- Your rental income exceeds £7,500
- You’re deciding between Method A and Method B
- You have multiple sources of income
- You’re new to Self Assessment tax returns
- You’ve moved properties during the tax year
In these situations, consider getting professional tax advice.
A qualified accountant or tax adviser can:
- Calculate which method (A or B) saves you the most tax
- Identify all allowable expenses if using Method A
- Prepare and submit your Self Assessment tax return accurately
- Handle correspondence with HMRC on your behalf
- Ensure you meet all deadlines to avoid penalties
- Advise on optimising your tax position for future years
Many people using Rent-a-Room Relief could save even more by:
- Choosing the optimal calculation method
- Claiming all eligible expenses they didn’t know about
- Coordinating with other tax reliefs and allowances
- Planning ahead for maximum tax efficiency
Consider professional advice to ensure you’re getting every penny you’re entitled to.
Key takeaways: Don’t miss out on 2025/26
✓ HMRC research confirms: Rent-a-Room Relief is simple, effective, and users are satisfied
✓ You can earn: Up to £7,500 tax-free per year (£3,750 for joint owners)
✓ Zero paperwork: If under £7,500, no notification or tax return needed
✓ Broad eligibility: Works for homeowners and tenants (with permission)
✓ Flexible: Choose between two calculation methods if over £7,500
✓ Significant savings: Worth £9,375 gross income for basic-rate taxpayers, £12,500 for higher-rate
✓ Multiple uses: Long-term lodgers or short-term Airbnb-style lettings
✓ Easy switching: Change calculation methods year by year
✓ Proven track record: 30+ years of successful operation
✓ Growing popularity: 89% increase in homeowners using this 2021-2024
BOTTOM LINE: If you have a spare room and aren’t using Rent-a-Room Relief, you’re missing out on one of the most accessible and generous tax breaks available to UK residents.
For more information, visit the official HMRC guidance at GOV.UK Rent a Room Scheme or consult with a qualified tax professional if you need personalised advice.
SOURCES: HMRC HS223 Rent a Room Scheme (2025), HMRC Evaluation of Rent a Room Relief (December 2024, Ipsos).
