Letting a spare room can be a sensible way to bring in extra income from space you already have. But having someone live in your home is a bigger step than it first appears, and there are practical, legal and tax points to think about before you start.
Here are the questions we suggest asking before you take in a lodger.
Key points
- Check your mortgage and your insurance before you agree anything with a lodger.
- A lodger who shares your home usually has fewer rights than a tenant, but the agreement still matters.
- The Rent a Room Scheme means you don’t pay tax on income from letting furnished accommodation in your home, up to a threshold.
- If your income goes over the threshold, you’ll need to complete a tax return, and you can choose how to be taxed.
- Keep records of rent received and costs from the start.
On this page
Do you need permission from your lender or landlord?
If you have a mortgage, check whether your lender needs to know or give consent. If you rent your home, your tenancy agreement may not allow you to sublet or take in a lodger without your landlord’s permission. Leaseholders should check their lease too.
Is your insurance still valid?
Home insurance policies don’t always cover homes with a lodger, and some may cover your belongings but not theirs. Tell your insurer before your lodger moves in, and ask what changes.
Is it a lodger or a tenant?
If you live in the property and share facilities such as the kitchen or bathroom with the person, they will usually be a lodger, and you will be a resident landlord. Lodgers generally have fewer rights than tenants, which affects how the arrangement can be ended. GOV.UK’s guide to renting a room in your home explains the different types of arrangement and what each means.
Whatever the arrangement, put it in writing: the rent, what it includes, notice periods, house rules and how deposits are handled.
How does the Rent a Room Scheme work?
The Rent a Room Scheme lets you earn income from letting furnished accommodation in your home without paying tax on it, up to a threshold each year. The threshold is lower if you share the income with someone else, such as a joint owner. The scheme applies if you’re a resident landlord, whether or not you own your home, and to some bed and breakfasts and guest houses. It can’t be used for homes converted into separate flats.
If your income is below the threshold, the exemption is automatic and you don’t need to do anything. If it goes over, you must complete a tax return. You can then either opt into the scheme, or record your actual income and expenses on the property pages of your return instead. Which works out better depends on your costs, so it’s worth comparing both. The details are on GOV.UK’s Rent a Room Scheme page.
What should you keep records of?
- rent received, with dates;
- any extra payments, such as for meals, cleaning or laundry;
- costs you pay for the letting, such as a share of bills, furnishings and repairs;
- your written agreement and any deposit paid and returned.
Even if you expect to stay under the threshold, good records make it easy to show that, and to compare your options if your income rises.
Other practical points
Think about how bills will be shared, whether your council tax position changes, and what checks you’ll carry out before someone moves in. In England, you must also check that a lodger has the right to rent.
Sources
Our main sources are HMRC and GOV.UK:
Talk to us before you take in a lodger
If you’re thinking of letting a room, we can help you work out how the income will be taxed and whether opting into the Rent a Room Scheme makes sense for you. Call us on 020 7164 0225, send us a WhatsApp message or email your tax question to hello@ibandco.co.uk.
You can also read about our services for property owners.
First published 9 April 2024. Tax content checked on 9 October 2026. This article reflects the rules at the date it was first published. Where something has changed since, we’ve added an update note. Rules and rates change, so please check with us before acting.
Please note: this article is general information based on our understanding of UK tax rules at the date shown above. It is not advice for your circumstances, and tax rules and rates can change. Please speak to us before acting on it.
