Renting out a room in your house

Renting out your spare room is a great way to get your home working for you. Here's everything you need to know from how much to charge, what websites to use, how to make £7,500 tax free and what you need to watch out for.

Angela Kerr Director, Editor

Can I rent a room in my house?

Yes! Quite simply, renting out a room in your house means you can make money from your home, letting you supplement your main income, helping you manage bills and meet other expenses.

It’s such a good idea that even the government is encouraging more people to do it. With the Rent a Room scheme, you will be able to earn up to £7,500 tax free a year (raised from £4,250 in 2015) for renting out a furnished spare room.

If you’re not sure how to proceed, it’s best to get tax advice. You can find local advisers via our partners at Unbiased

How to rent out a room in your house

SpareRoom and Airbnb are two of the biggest websites that homeowners use to rent out their spare rooms, whether it’s for a short or long term let.

On Spareroom, for example, you simply set up an account and list your home for free. Add a description of your home, the room and a small bio so the applicant knows a little about you. You can pay to boost the ad, but this is optional. When your ad is live you should receive daily alerts from interested prospective tenants via the platform.

The site MondaytoFriday also allows you to rent out a spare bedroom during the working week, leaving it free for you at the weekend.

These sites make renting out a room in your house easy, helping connect you with prospective lodgers and even providing added reassurance, guidance and services. We would advise reading the company reviews on, for example, Trustpilot before proceeding to give you a bit of insight from users of the platforms, how responsive the companies were in the event of a problem and to see some of the real life experiences of landlords or tenants renting out their rooms.

What can I charge to rent out a spare room?

It’s always a good idea to do a bit of research and find out what other hosts nearby are charging before you start renting out a room in your house.

Consider the size of the room, any amenities (i.e. en-suite bathroom) and also take the location and transport links of your property into account when deciding how much to charge.

According to Spareroom.com, at the end of 2023, the average rent in the UK is £739 per calendar month That’s 12% higher than in the same period of 2022. But be aware average charges vary by region, with rooms in the South East, South West, East Anglia and Scotland charging more. But these are only averages. Look at local data on spare room websites to get your price right.

The SpareRoom website has a section with average rent charges which is also helpful. And this Airbnb link gives you an estimate.

How does the Rent a Room scheme work?

If you think you will earn over £7,500 from renting your room, it’s a good idea to sign up to the scheme to secure the tax savings.

To qualify for the scheme there are some rules:

• you can rent out a room in your house, or part of your house (e.g. a whole floor). But the scheme does not extend to renting out a self-contained flat or building.
• the room must be furnished – unfurnished rooms don’t qualify
• You don’t have to be a homeowner – if you have your landlord’s consent to sublet you can also access the tax free earnings under the scheme
• If you don’t normally fill out a tax return and the income is below £7,500 (around £625 a month), the exemption will be automatic – so don’t worry about doing anything. If the amount you earn is above the threshold, let the tax office know

You can earn up to £7,500 tax free by renting out a room in your house to a lodger. If you share the property with someone else, like your partner or spouse, you can claim £3,750 each. You can’t both claim the full £7,500.

It’s always prudent to get tax advice first. You can find local advisers via our partners at Unbiased

Do I have to declare rent a room income?

If your annual income for renting out a room in your house is below £7,500 (around £625 a month), and you don’t currently fill in a tax return, the Rent a Room exemption is automatic. So you don’t need to take further action. If the amount you earn is above this, then you need to make HMRC aware. You can do this by opting into the scheme and claiming your tax-free allowance. You do this on your tax return. Or you can choose not to opt into the scheme and instead record your income and expenses on the property pages of your tax return.

If your total income from rent (plus bills, meals, laundry etc if they aren’t included in the rent but you charge extra for them) comes to over £7,500 in the tax year, you’ll have to pay some tax.

If you’re not sure how to proceed, it’s best to get tax advice. You can find local advisers via our partners at Unbiased

How do I get started renting a spare room in my house?

First, choose which hosting website you want to use and have a read of all their advice and guidance. There is a wealth of knowledge on the sites so you can quickly get yourself up to speed. For example, did you know that live-in lodgers have different rights to those renting a flatshare from a landlord not living in the property?

You’ll want to read up on landlord and tenant rights before drawing up a contract for you and your lodger. Whether you decide to opt-in to the Rent a Room scheme or not, the government site has some good advice on the type of tenancy and rights your lodger will have, as well as, impact on council tax and capital gains tax which may have implications for when you come to sell your home.

When you’re ready, these sites make it easy to create an advert. Use high quality photos of the room and write up an accurate description.

Some sites offer a checking service to initially background-check guests and hosts alike. But you should interview the guests – either over the phone or by video call – before allowing them to book the room. Remember, you’re in control.

The sites have lots of advice on keeping safe and steps you can take to protect yourself in the process of selecting and interviewing a potential lodger.

Always try to get references – you may wish to speak to previous landlords and their employers.

Protecting your home

Some hosting sites offer insurance. But you’ll want to review and update your home insurance policy to take account of your new short or long term rental.

Obtain adequate liability insurance.

Your own contents insurance doesn’t normally cover the belongings of a guest, so make sure they know this before booking.

Can I claim a “digital tax break”?

There is a £1,000 ‘digital tax break’ for homeowners using Airbnb or similar sites to make money from their homes.

However, you will not be able to claim for both this new £1,000 tax relief  and the already existing Rent a Room relief.

The only way to benefit from both would be if a room was rented out which met the requirements of the rent-a-room tax rate and then the homeowner claimed through the property tax relief for renting out another part of their home – such as a driveway.

To see get independent tax advice, find a local adviser and book your free initial consultation through our partners at Unbiased. 

What else do I need to consider?

Getting a lodger could effect your council tax bill if you currently live on your own. You could lose your single person’s council tax discount of 25% – but could presumably add your new charge to the lodger’s rent.

Make sure you check the terms and conditions of any lease, mortgage and insurance contracts you have on your home. Some mortgage lenders may have restrictions on taking a lodger.

You don’t have to be a homeowner to rent out a spare room, but you will need your landlord’s consent if you are a tenant and want to rent out a room.

You may have to pay Capital Gains Tax when you sell your home if you let out all or part of it or you’ve taken in more than 1 tenant or lodger at a time. However, you may be entitled to Private Residence Relief and Letting Relief.

We hope you find this guide a useful starting point. While this guide touches on the tax implications of renting out a room, it is not comprehensive advice and tax rules change all the time. So please seek your own tax advice before proceeding.