For the 2026/27 UK tax year, an individual lets a spare room in the only home they live in to a lodger and receives gross rental income of £6,000 for the year, with no other income from letting property. Under HMRC's Rent a Room Scheme, which statement is correct?
- Because gross receipts of £6,000 are below the £7,500 Rent a Room limit, the income is automatically exempt from tax under the scheme without the individual needing to make a claim, provided they don't opt out to use actual expenses instead
- The £7,500 limit only applies where the room is let unfurnished; furnished lodger income is taxed in full regardless of the amount received
- The individual can claim the £7,500 Rent a Room limit and the separate £1,000 property income allowance against the same £6,000 of income, combining both reliefs
- Because the income exceeds £3,750, only half of the Rent a Room relief applies, leaving £2,250 of the £6,000 taxable
Why A? And why not the others?
Correct answer: A. Because gross receipts of £6,000 are below the £7,500 Rent a Room limit, the income is automatically exempt from tax under the scheme without the individual needing to make a claim, provided they don't opt out to use actual expenses instead
The Rent a Room Scheme lets someone letting furnished accommodation in their only or main home earn up to £7,500 a year tax-free (or £3,750 each if the income is shared between joint owners, not halved simply because income is high); since £6,000 is below the £7,500 limit and there is no other letting income, the exemption applies automatically without the individual needing to submit a claim, unless they instead choose to opt out and be taxed on income less actual expenses. The option restricting the scheme to unfurnished lettings is wrong because the Rent a Room Scheme specifically applies to furnished accommodation; it is not a furnished-versus-unfurnished distinction that removes the £7,500 limit. The option allowing both the Rent a Room limit and the property income allowance together is wrong because HMRC does not allow the property allowance to be claimed on income that is already covered by, or eligible for, Rent a Room relief; the two are mutually exclusive on the same income. The option halving relief once income passes £3,750 is wrong because £3,750 is only relevant when the income is split between two or more people sharing the same source, not a scaling-down threshold that applies to a sole recipient.
Source: GOV.UK: Rent a room in your home