Quick answer
Rent a Room relief lets you earn up to £7,500 a year tax-free from letting furnished accommodation in your own home. HMRC’s MTD guidance says the relief can be recorded during the year in the digital records included in your quarterly updates.
Key facts
Up to £7,500 a year tax-free from a lodger in your home
Halved to £3,750 if you share the income with someone
Must be furnished accommodation in your only or main home
Can be recorded in MTD digital records during the year
How the relief works
If your gross receipts from letting furnished accommodation in your own home are £7,500 or less, they’re automatically tax-free. Receipts include rent plus anything you charge for meals, cleaning or laundry. The limit is halved to £3,750 if someone else also receives income from letting in the same home.
Above £7,500
You have two choices. Pay tax on the amount over £7,500 by opting into the scheme on your return, or don’t use the scheme and report the actual rent and expenses as normal property income. You can’t combine Rent a Room relief with the £1,000 property allowance on the same income.
How it fits with MTD
HMRC’s MTD guidance on adjusting property income lists Rent a Room relief and says it can be recorded in digital records during the tax year and included in quarterly updates. If you’re in MTD because of other property or self-employment income, lodger income goes into your UK property records.
Does lodger rent count towards the threshold?
HMRC’s qualifying income guidance doesn’t mention Rent a Room receipts specifically. If lodger income could take you over a threshold, check with HMRC or an accountant before relying on it either way. See working out qualifying income.
Not covered
Unfurnished lets
Rooms in a property that isn’t your main home