Rent-a-room relief or whole let: which applies to you

If you let out a spare room to a lodger, there is a decent chance you pay no tax on that rent at all. If you let out a whole flat or house, that particular route is closed to you. The difference comes down to one relief, and it confuses plenty of landlords who own both kinds of let.

Here is how it works, and how to tell which side of the line you sit on.

What rent-a-room relief actually covers

Rent-a-room relief lets you receive up to £7,500 a year tax-free from letting furnished accommodation in your own home. That means the home you live in as your main residence, with the lodger sharing it.

A few points people often miss:

• The £7,500 is measured on gross receipts, before any costs. If you also charge your lodger for meals, cleaning or laundry, those amounts count towards the limit too.
• If someone else also receives income from letting a room in the same home, such as a partner, the limit is split between you. GOV.UK sets out how this works.
• If your gross receipts stay at or below the limit, the relief applies automatically. You don't need to do anything to claim it.

Whole-property lets can't use it

The relief is tied to your own home. If you let out a separate flat, a house you have moved out of, or a property you bought to rent, none of that income qualifies, however small it is. The same goes for a short-term let of a whole property: the furnished holiday lettings regime ended in April 2025, so that income is now ordinary UK property income.

Whole lets are taxed in the usual way: rent received, minus allowable expenses, with tax on the profit. GOV.UK's page on paying tax when renting out property covers the basics, and our guide to reporting property income to HMRC walks through it in plain terms.

If you have a lodger at home and a separate rental flat, you can use rent-a-room relief for the lodger and the normal method for the flat. They are treated separately.

An alternative to claiming expenses

This is the part that catches people out. Rent-a-room relief replaces expense claims. You can't take the £7,500 tax-free amount and then deduct your share of the heating, broadband and insurance on top.

When your gross room income goes over £7,500, you choose one of two methods:

1. The rent-a-room method: pay tax on the amount above £7,500, with no expenses deducted.
2. The normal method: pay tax on your actual profit, which is rent minus genuine allowable expenses.

You pick whichever leaves you with less taxable income.

A worked example: Robert's lodger

Robert owns a three-bedroom semi in Leicester and lives there. He lets one room to a lodger for £650 a month, including bills. Over the tax year that is £7,800.

He works out the costs he could fairly attribute to the room: a share of utilities, broadband, insurance and some wear and tear. They come to about £1,400.

• Rent-a-room method: £7,800 minus £7,500 = £300 taxable
• Normal method: £7,800 minus £1,400 = £6,400 taxable

The relief is by far the better option for Robert. Because his receipts are over the limit, he does need to report the income and choose the rent-a-room method, but he is taxed on only £300.

Now suppose Robert's sister Sarah lets out a one-bedroom flat she owns across town for the same £7,800 a year. She can't use rent-a-room relief at all, because she doesn't live there. She is taxed on her rent minus her expenses, like any other landlord.

When opting out is the better choice

For most people with a single lodger, the relief wins easily. There are times when it doesn't:

• Your costs are higher than your rent. If you take your first lodger part-way through the year, the rent received might be modest while your attributable costs are not. Under the relief you can't show a loss. Under the normal method you can, and a property loss can generally be carried forward against future property income.
• Your expenses genuinely exceed £7,500. This is rare for one room, but with several lodgers and high running costs, the normal method can come out ahead.

If your income is under £7,500 and you want to use the normal method instead, you need to tell HMRC that you are opting out. There are time limits for making or withdrawing that choice, so check the current rules on the rent-a-room page before you decide. Run the numbers both ways each year, because the answer can change as your situation does.

Where Making Tax Digital fits in

Making Tax Digital for Income Tax is phased in by qualifying income, which is your gross rental and self-employment income before expenses. It applies to those over £50,000 from 6 April 2026, over £30,000 from 6 April 2027, and over £20,000 from 6 April 2028. GOV.UK's guide to who needs to use MTD and when explains how different types of income are counted, including income covered by reliefs. Check it if a lodger is part of your picture.

If you do fall into MTD, the routine is the same for whatever property income needs reporting: digital records, four quarterly updates, and one tax return after the year ends. Our guide to MTD income thresholds goes into more detail.

If you need to keep records for one property, Quarterwise's Free plan covers one property with full filing to HMRC and no time limit. If you have a lodger alongside one or more whole lets, the Pro plan's per-property profit and loss makes it easy to keep the two kinds of income apart and compare the methods each year.

This article is general information, not tax advice. Please check with HMRC or a qualified accountant about your own circumstances.