A landlord client lets a spare room to a lodger: the £7,500 Rent a Room limit worked as a monthly rent

A landlord client has a spare room and a lodger. They ask the agent a plain question: is the rent taxable? GOV.UK's answer turns on one number, £7,500 a year. The figure is easy to state and awkward to use, because rent is agreed by the month. This guide turns it into a monthly rent you can check in a few seconds.

What GOV.UK says

The Rent a Room Scheme page says you can earn "up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home." It adds: "The threshold is halved to £3,750 if you share the income with someone else."

On claiming, the page says that if you are under the limit you need do nothing, because the exemption is automatic. If you earn more, you "must complete a tax return". There are two ways to handle it. You can opt in to the scheme on your tax return and claim the allowance. Or you can leave the scheme and record your income and expenses on the property pages of your tax return instead. The page points to helpsheet HS223 for the form.

The limit as a monthly rent

Divide by 12.

Check by multiplying back: £625 x 12 = £7,500, and £312.50 x 12 = £3,750.

Five rents tested against the limit

These use the rent alone. The page does not say what counts as "earn", so we have not added bills, meals or other charges to the sums. A client who charges for anything on top should ask HMRC or an accountant whether it counts.

When two people share the income

The halved limit applies where the income is shared. Take a room let at £700 a month, £8,400 a year, in a house that two people own, who split the rent equally. Each receives £4,200 (8,400 / 2). The limit for each is £3,750, so each is £450 over (4,200 - 3,750). The same room that looks safe for a sole landlord at £625 a month is over the limit for two owners at £312.50 each, which is only £625 in total.

The page does not define "share the income with someone else", so we cannot say how it treats other arrangements, such as a lodger who also pays someone else, or an owner who lets part of a jointly owned home. Ask the client to check with HMRC.

What an agent can and cannot say

• You can say the page gives £7,500 a year, or £3,750 if shared, and that going over means a tax return.
• You cannot say which of the two methods leaves a client with less tax. The page does not give the arithmetic, and we have not read helpsheet HS223. That comparison belongs to the client's accountant.
• A client over the limit also has other deadlines to meet. Our guides on the property allowance against actual expenses and late Self Assessment penalties for landlords cover the next steps, and the Making Tax Digital guide covers how reporting is changing.

What we did not read

We did not read helpsheet HS223, what counts as the rent for the scheme, how the scheme treats a home the landlord does not live in, or how it interacts with the property allowance. The Becoming a resident landlord page also covers lodger rights; we did not use it for anything beyond the £7,500 figure and the lodger wording. The figures above are the pages' own and may change, so check them before quoting.

Where Overlyft fits

Overlyft can set up AI staff who join your lettings team and take the job of checking each lodger rent against the limit and drafting the note to the client, with the monthly sum worked out and shown. A person in your office approves every note before it goes out.

This is general information for England, not tax or legal advice.