Rent-a-room relief 2026/27: the £7,500 limit explained

Rent-a-room relief lets you earn up to £7,500 a year tax-free by letting furnished accommodation in your own home. It applies to lodgers and to bed and breakfast or guest house hosts, and the limit falls to £3,750 if someone else also receives letting income from the same property. If your receipts stay within the limit, the exemption is automatic.

Who can use rent-a-room relief?

Owner occupiers and tenants can both use it, as long as they let furnished accommodation in their only or main home. HMRC’s helpsheet HS223 covers a room let to a lodger and a trade such as a guest house or B&B.

The scheme does not apply to:

• accommodation that is not part of your main home when you let it
• unfurnished accommodation
• space used as an office or for any business, though a lodger who works from home in the evenings or a student with study space is fine
• a UK home you let while you live abroad

GOV.UK’s Rent a Room Scheme page adds that you cannot use it for a home converted into separate flats.

What counts towards the £7,500?

The limit is tested against gross receipts for the tax year, 6 April to 5 April, before any expenses. Receipts include:

• rent
• payments for meals, goods and services such as cleaning or laundry
• contributions to heating, light and other bills
• any balancing charges

The limit does not change if you let for less than 12 months. If you move house during the year and let rooms in both homes, you add the receipts together.

How is the limit shared?

Your limit is £3,750 if anyone else receives income from letting accommodation in the same property. A typical example is a couple who own the home jointly and both receive rent from a lodger.

What happens if you go over the limit?

You must file a Self Assessment return and choose between two methods.

• Method A: you pay tax on actual profit, which is receipts minus expenses and any capital allowances. HMRC uses this by default.
• Method B: you pay tax on receipts minus £7,500, or £3,750 if shared. You cannot deduct any expenses.

Worked example from HS223

Chris lets a room for £200 a week and receives £200 towards heating and light. His gross receipts for 2025/26 are £10,600 and his expenses are £9,000.

Method A is better for Chris because his costs are high. A lodger in a room where the costs are low usually favours Method B.

Which applies to you?

• If receipts are £7,500 or less and you have no loss: do nothing. The exemption is automatic.
• If receipts are £7,500 or less but expenses are higher: opt out to claim the loss under Method A, which can be carried forward against future rental profits.
• If receipts exceed £7,500 and expenses are under £7,500: elect for Method B.
• If receipts exceed £7,500 and expenses are over £7,500: stay on Method A.
• If you let a whole separate property: rent-a-room does not apply. Look at the £1,000 property allowance instead.

You cannot use the property allowance on rent-a-room income if you choose to deduct expenses from it instead of using the scheme, as HMRC’s tax-free allowances guidance explains.

How do you claim or elect?

1. Add up gross receipts for the tax year.
2. Compare the two methods using your real expenses.
3. File a return if over the limit. Lodger income goes on the UK property pages; see our SA105 guide.
4. Tell HMRC if you want Method B or want to opt out of the exemption.
5. Tell HMRC again if you switch back. A Method B election continues until you withdraw it, but stops automatically in a year your receipts fall below the limit.

What is the deadline for an election?

Section 800(5) of the Income Tax (Trading and Other Income) Act 2005 sets the deadline as the first anniversary of the normal Self Assessment filing date. For 2025/26 that reads as 31 January 2028. HS223’s own worked example gives 31 January 2027 for the same year, so the safest course is to make the election with your return by 31 January 2027.

How will rates change from April 2027?

Taxable lodger income is property income. From 6 April 2027, Budget 2026 sets property income rates of 24%, 44% and 49% in England, Wales and Northern Ireland. The £7,500 exemption itself is unchanged, so staying within it becomes more valuable. Compare years with the property income tax calculator.

If you host short stays in a spare room, read our guide to Airbnb host tax.

Frequently asked questions

What is the rent-a-room limit for 2026/27?

It is £7,500 a year, or £3,750 if someone else receives income from letting accommodation in the same property.

Do I need to tell HMRC about a lodger?

Not if your gross receipts are £7,500 or less and you do not want to claim a loss. The exemption is automatic.

Does rent-a-room relief cover Airbnb?

Yes, if you let furnished accommodation in your only or main home, including as a B&B. It does not cover a separate property or a home you no longer live in.

Can I claim expenses under rent-a-room relief?

Not while you use the exemption or Method B. To deduct expenses you must use Method A, which taxes your actual profit.

Does the £7,500 include bills my lodger pays?

Yes. Contributions to heating, light, meals, cleaning and laundry count as receipts alongside the rent.