Taking in a lodger in 2026: the Rent a Room tax rules (UK)

If you're considering taking in a lodger to help with your mortgage, offset rising living costs, or simply make use of spare space in your home, you're not alone. Thousands of homeowners across the UK rent out rooms to lodgers each year, benefiting from HMRC's generous Rent a Room scheme whilst providing affordable accommodation in tight rental markets. However, the arrangements come with important legal, tax, and practical considerations that differ significantly from standard landlord-tenant relationships.

This August article explains what a lodger is, how the Rent a Room tax relief works in 2026, your legal rights as a resident landlord, and the practical steps to take before, during, and after hosting a lodger in your home. Whether you're a homeowner exploring extra income or an accidental landlord considering your options, this article is a good place to start.

What is a lodger?

A lodger is someone who rents a room in your home whilst you continue to live there. This is the crucial distinction. Unlike a tenant who rents a self-contained property or has exclusive possession of part of a property, a lodger shares living space with you, the resident landlord. Typically, this means the lodger has their own bedroom but shares common areas like the kitchen, bathroom, and living room with you and possibly your family.

The relationship differs fundamentally from a standard tenancy agreement because the lodger doesn't have exclusive possession of any part of the property. You retain the right to access all areas of your home, including the lodger's room, though reasonable notice and respect for privacy remain important.

This shared occupancy creates a different legal framework. Lodgers have fewer statutory protections than tenants under an Assured Shorthold Tenancy (AST), making arrangements more flexible for homeowners. However, it also means you must understand what rights lodgers do have and how to manage the arrangement fairly and legally.

Can I rent a room in my house?

Yes, homeowners can rent out a room in their house to a lodger, provided certain conditions are met. If you own your property outright, you have full freedom to take in lodgers as you see fit, though it's sensible to inform your buildings insurance provider and check any local HMO licensing requirements if you're considering multiple lodgers.

If you have a mortgage, you must check your lender's terms. Most residential mortgages allow one or two lodgers without requiring consent, but taking in more lodgers or running what could be considered a business may require permission or a switch to a buy-to-let mortgage. Failing to inform your lender when required could constitute a breach of your mortgage agreement.

If you're a tenant yourself, renting your home from a landlord, you need explicit written permission before subletting to a lodger. Most tenancy agreements prohibit subletting without consent, and taking in lodgers without permission could lead to eviction. Always get written approval from your landlord before proceeding.

Leasehold properties may have restrictions in the lease about subletting or taking lodgers. Review your lease carefully, and if in doubt, consult a solicitor or your managing agent. Similarly, if your property sits within a leasehold development, check whether there are restrictions in the development's rules.

The Rent a Room scheme: how it works in 2026

The Rent a Room scheme is one of the UK's most generous tax reliefs, designed specifically to encourage homeowners to rent out spare rooms. For the 2026-27 tax year, the scheme allows you to earn up to £7,500 per year tax-free from renting out furnished accommodation in your main residence. If you jointly own the property, you each get the full £7,500 allowance, meaning couples can earn £15,000 combined before any tax is due.

How Rent a Room relief works

If your gross rental income from lodgers is £7,500 or less, you don't need to report it to HMRC or include it on your Self Assessment tax return. The income is completely tax-free, and you don't need to take any action beyond keeping basic records.

If your income exceeds £7,500, you have two options for calculating tax. You can use Rent a Room relief, which means you pay tax only on income above £7,500 with no deduction for expenses. Alternatively, you can declare the full rental income and deduct actual expenses like utilities, repairs, insurance, and a proportion of council tax and mortgage interest. The choice depends on your specific circumstances and which method results in lower tax.

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For most homeowners with modest lodger arrangements, Rent a Room relief is simpler and more beneficial. If you spend heavily on maintaining the lodger's room or providing significant additional services, calculating tax based on actual income and expenses might work better. You can switch between methods each tax year, choosing whichever is most advantageous.

Do I have to declare Rent a Room income?

If your gross income from lodgers is £7,500 or less, you don't need to declare it to HMRC, report it on a Self Assessment return, or pay any tax. The relief applies automatically. However, if you're already registered for Self Assessment for other reasons, you may need to include the information on your return even if no tax is due.

Once your income exceeds £7,500, you must notify HMRC and complete a Self Assessment tax return. If you're not already in the Self Assessment system, you need to register. The deadline for notifying HMRC is 5 October after the end of the tax year in which you first exceeded the threshold. For example, if you exceed £7,500 during the 2026-27 tax year, which runs 6 April 2026 to 5 April 2027 , you must notify HMRC by 5 October 2027.

For landlords already managing rental properties, adding Rent a Room income to existing tax reporting is straightforward, especially if you use Making Tax Digital compliant software. Recording transactions digitally throughout the year makes quarterly updates and year-end declarations simpler.

See how August can support you with Making Tax Digital (MTD)

Joint ownership and the relief

If you jointly own your home with a partner or spouse, you each receive the full £7,500 Rent a Room allowance. This means couples can earn up to £15,000 combined before paying tax on lodger income. However, the relief applies only to your main residence, so you cannot claim it on a second property or investment property, even if you occasionally stay there.

What income counts towards the limit?

Gross rental income includes all payments received from your lodger. Rent, utility contributions, charges for meals or cleaning services, and any other payments related to the accommodation all count. If you provide breakfast or evening meals as part of the arrangement, this is still covered by Rent a Room relief as long as the accommodation is furnished and the lodger lives in your home.

Crucially, the £7,500 threshold is based on gross income, not profit. You don't deduct expenses when calculating whether you've exceeded the limit. If your lodger pays £650 per month, that's £7,800 gross income, which exceeds the threshold, even if your actual costs and expenses mean you're barely making a profit.

Legal rights when taking in a lodger

The legal relationship between a resident landlord and a lodger differs significantly from standard landlord-tenant arrangements. Understanding these differences protects both parties and prevents misunderstandings.

Lodgers don't have Assured Shorthold Tenancies

Because lodgers share accommodation with you and don't have exclusive possession of any part of the property, they cannot have an Assured Shorthold Tenancy. This means they are not protected by the same statutory rights that apply to tenants renting self-contained properties. See Annexes and Granny Flat.

As a result, you don't need to follow Section 21 or Section 8 eviction procedures. The Renters' Rights Act, which abolishes Section 21 for standard tenancies from 1 May 2026, does not affect lodger arrangements. Resident landlords retain the flexibility to end agreements with reasonable notice periods, typically matching the rental payment period.

Notice periods and ending the arrangement

Most lodger agreements specify a notice period, commonly one month if rent is paid monthly, or one week if paid weekly. The notice period should be clearly stated in your written agreement. If no notice period is specified, reasonable notice is required, which courts typically interpret as equivalent to the rental payment period.

Unlike tenants, lodgers can be asked to leave with reasonable notice without needing to prove grounds for possession. You don't need a court order to evict a lodger who refuses to leave after proper notice, though you cannot use force or harassment. If a lodger refuses to leave, you can apply for a court order, but the process is faster and simpler than evicting a tenant.

While lodgers have fewer legal protections, they still have rights. You cannot forcibly remove a lodger, change locks without notice, or harass them. Doing so could result in criminal charges. Always follow the notice period in your agreement, communicate clearly, and if necessary, seek legal advice rather than taking matters into your own hands.

Deposit protection and lodger agreements

One significant difference between lodgers and tenants is that deposit protection schemes don't apply to lodger arrangements. You're not required to place a lodger's deposit in a government-approved scheme or provide prescribed information within 30 days.

However, not being legally required to protect deposits doesn't mean you shouldn't handle them properly. Good practice involves agreeing the deposit amount in writing, documenting the property's condition at the start with photographs or a check-in report, and returning the deposit promptly when the lodger leaves, minus any legitimate deductions for damage beyond fair wear and tear.

Treating deposits fairly protects you from disputes and maintains good relationships. August's document storage makes it easy to keep photographs, agreements, and deposit records organised and accessible, reducing the risk of disagreements when the lodger moves out.

Right to Rent checks

Even though lodgers aren't tenants, you must still carry out Right to Rent checks before allowing someone to move in. This applies in England only. The requirement ensures the lodger has legal permission to be in the UK.

You need to check original documents that prove identity and immigration status, such as a passport or biometric residence permit. Take copies, record the date of the check, and store the evidence securely. Failing to conduct Right to Rent checks can result in civil penalties of up to £3,000 per lodger, or in serious cases, criminal prosecution.

For landlords managing multiple properties or lodgers, keeping compliance tasks organised prevents oversights. August's compliance checklist provides step-by-step guidance for Right to Rent checks and other requirements, with reminders to keep you on track.

Lodger insurance: protecting yourself and your home

Standard buildings insurance and contents insurance policies may not cover you when you take in a lodger. Many insurers consider having a lodger a material change to your circumstances, which must be disclosed to keep your policy valid.

Buildings insurance

If you own your home, notify your buildings insurance provider that you're taking in a lodger. Some insurers include lodgers as standard, whilst others require an endorsement or charge an additional premium. Failing to inform your insurer could invalidate your policy, leaving you unprotected if you need to claim for damage or loss.

Contents insurance

Similarly, check whether your landlord contents insurance covers you when you have a lodger. You may need to increase coverage or add specific lodger insurance. Remember that your contents insurance typically covers only your possessions, not the lodger's belongings. Advise lodgers to arrange their own tenant contents insurance to protect their personal items.

Lodger-specific insurance

Some insurers offer lodger insurance policies designed specifically for resident landlords. These policies typically cover public liability, accidental damage caused by the lodger, loss of rent if the lodger stops paying, and legal expenses if disputes arise. Whilst not legally required, lodger insurance provides peace of mind, especially if you're relying on the income to cover mortgage payments or household expenses.

For landlords already managing rental properties, discussing lodger arrangements with your existing landlord insurance provider makes sense. They may offer multi-policy discounts or be able to extend coverage to include your lodger arrangement.

Writing a lodger agreement

Whilst not legally required, a written lodger agreement protects both you and your lodger by setting out clear expectations, responsibilities, and terms. A well-drafted agreement reduces misunderstandings and provides a reference point if disputes arise.

What to include in your lodger agreement

A comprehensive lodger agreement should cover the following:

Names and addresses - Your full name and address, and the lodger's full name. Clearly state that you are the resident landlord and the lodger will be sharing the property with you.

Room and shared facilities - Describe which room the lodger will occupy and which areas are shared, such as the kitchen, bathroom, and living room. Specify any areas that are private or out of bounds.

Rent amount and payment terms - State the monthly or weekly rent, the payment date, and the preferred payment method. Specify whether utilities, council tax, internet, and other bills are included in the rent or paid separately. See our rent payment terms calculator to help you.

Deposit - Confirm the deposit amount, the purpose of the deposit, and the conditions under which deductions may be made. Outline the process for returning the deposit when the lodger leaves.

Notice period - Specify how much notice either party must give to end the arrangement. Typically, this matches the rental payment period, one month if rent is paid monthly.

House rules - Set out practical rules covering guests, noise levels, smoking, pets, use of communal areas, cleaning responsibilities, and any other expectations. Being clear upfront prevents friction later.

Utilities and bills - Clarify which bills are included in the rent and which the lodger must contribute towards. If the lodger pays a share of utilities, explain how this will be calculated and when payment is due.

Ending the agreement - Outline the process for either party ending the arrangement, including notice requirements and the return of keys and deposit.

Templates for lodger agreements are widely available online, including from organisations like Shelter and SpareRoom. However, tailoring the agreement to your specific situation and property ensures it covers all relevant points.

Signing and storing the agreement

Both you and the lodger should sign and date the agreement, with each party keeping a copy. Store your copy securely along with other property documents. August's document storage provides a convenient, secure place to keep lodger agreements, deposit records, Right to Rent checks, and photographs of the room's condition, all accessible from your phone.

The practical checklist: steps before, during, and after

Taking in a lodger involves more than just advertising a spare room and collecting rent. Following a structured approach ensures legal compliance, protects your interests, and creates a positive experience for both parties.

Before advertising

Check permissions - Confirm your mortgage lender, landlord (if applicable), and insurer all permit you to take in lodgers. Get written confirmation where required.

Review local licensing - In some areas, having multiple lodgers may trigger HMO licensing requirements, particularly if you rent to three or more unrelated lodgers. Check with your local council.

Prepare the room - Ensure the room is furnished to a good standard, clean, and well-maintained. Install a working smoke alarm in the room and ensure carbon monoxide alarms are fitted where required under Carbon Monoxide Alarm Regulations.

Set a fair rent - Research comparable rooms in your area to ensure your rent is competitive. Consider what's included in the rent and how this compares to similar offerings.

Draft your lodger agreement - Prepare a clear, comprehensive agreement that covers rent, deposit, notice periods, house rules, and responsibilities.

Update your insurance - Notify your buildings and contents insurance providers, and arrange lodger insurance if desired.

During the advertising and selection process

Advertise carefully - Use reputable platforms like SpareRoom, your local community groups, or word-of-mouth. Be honest about the accommodation, shared facilities, and house rules in your listing.

Meet prospective lodgers - Arrange viewings and take time to meet candidates. You're inviting someone into your home, so trust your instincts and choose someone you feel comfortable living with.

Request references - Ask for employment references, previous landlord references, or personal references to verify reliability and character.

See our free referencing templates on our resources page

Conduct Right to Rent checks - Before agreeing to let someone move in, complete Right to Rent checks using original documents. Take copies and record the date of the check.

Agree terms in writing - Once you've selected a lodger, agree all terms in writing using your lodger agreement. Both parties should sign before the lodger moves in.

When the lodger moves in

Collect the deposit - Take the agreed deposit before the lodger moves in. Provide a receipt and record the amount in your lodger agreement.

Document the room's condition - Take photographs of the room and shared areas, noting any existing damage or wear. Share these with the lodger and keep copies for your records.

Provide keys - Give the lodger keys to the property and their room if applicable. Record how many keys you've provided.

Agree payment method - Confirm how rent will be paid, whether by bank transfer, standing order, or another method. If you manage multiple properties using August's rent tracking, you can monitor lodger payments alongside your other rental income for a complete financial picture.

Set expectations - Review house rules, introduce any other household members, and ensure the lodger knows where everything is and how shared facilities work.

During the arrangement

Maintain communication - Keep lines of communication open. Address any issues promptly and fairly, and be willing to listen to the lodger's concerns.

Keep records - Track rent payments, record any maintenance or repairs carried out in the lodger's room, and keep documentation of any agreements or changes to the arrangement.

Respect privacy - Whilst you have the right to access all areas of your home, give reasonable notice before entering the lodger's room unless there's an emergency.

Stay compliant - If your lodger income exceeds £7,500, register for Self Assessment and report the income appropriately. Keep records of all income and expenses for tax purposes.

Review regularly - Check in periodically to ensure the arrangement is working for both parties. If problems arise, address them quickly before they escalate.

When the lodger leaves

Provide or receive notice - Either you or the lodger should provide written notice according to the terms of the agreement. Confirm the move-out date and expectations.

Arrange a check-out - Inspect the room with the lodger present, comparing its condition to the check-in photographs. Discuss any damage or cleaning issues.

Return the deposit - Deduct any legitimate costs for damage beyond fair wear and tear, unpaid rent, or bills. Return the remaining deposit promptly, ideally within ten days, with an itemised breakdown of any deductions.

Update your records - Close off the arrangement in your records, noting the end date and confirming the deposit return. If you use August, update your property records to reflect the change.

Notify relevant parties - Inform your insurer, mortgage lender, if required, and HMRC (if your Rent a Room income now falls below £7,500) that the arrangement has ended.

Tax considerations beyond Rent a Room relief

Whilst the Rent a Room scheme simplifies tax for most homeowners taking in lodgers, understanding the broader tax picture helps you make informed decisions.

When Rent a Room relief isn't the best option

If your expenses for maintaining the lodger's room are high, or you provide significant additional services, calculating tax based on actual income minus expenses might result in lower tax than using Rent a Room relief. This is particularly relevant if you provide meals, extensive cleaning, or incur substantial utility costs.

For example, if your lodger pays £10,000 per year but your actual expenses total £5,000, using Rent a Room relief means you pay tax on £2,500 (£10,000 minus the £7,500 allowance). However, if you declare full income and expenses, you pay tax on £5,000 profit, which could result in higher tax depending on your tax bracket. Running the numbers both ways helps you choose the most tax-efficient method.

Making Tax Digital and lodger income

From April 2026, landlords with rental income above £50,000 from properties and self-employment must comply with Making Tax Digital for Income Tax. If you manage rental properties alongside taking in lodgers, your combined income might push you over the threshold.

For small landlords using digital tools like August to manage multiple income streams, adding lodger income to your existing records is straightforward. Digital record-keeping, expense tracking, and organised documentation simplify quarterly reporting and year-end declarations.

Capital Gains Tax implications

If you sell your home and have claimed Rent a Room relief, this typically doesn't affect your Principal Private Residence relief for Capital Gains Tax (CGT). However, if you've rented out a substantial portion of your home or run a commercial lodging business, part of the property might not qualify for full CGT relief. For most homeowners taking in one or two lodgers whilst living in the property, this isn't a concern, but if you're considering selling, speak to an accountant.

Common challenges and how to handle them

Even well-planned lodger arrangements sometimes encounter difficulties. Understanding common challenges and how to address them reduces stress and protects both parties.

Rent arrears

If your lodger falls behind on rent, address the issue immediately. Speak to them to understand the reason and agree a plan for catching up. If the problem persists, you may need to give notice to end the arrangement. Unlike with tenants, you don't need to follow formal rent arrears procedures, but clear communication and documentation remain important.

Noise and house rule violations

Living with a lodger means sharing space, which requires mutual respect and compromise. If house rules are being ignored, address the issue calmly and directly. Sometimes small adjustments or clearer communication resolve problems. If violations persist, you may need to review whether the arrangement is working and consider giving notice.

Personality clashes

Not every lodger arrangement works out, even when both parties have good intentions. If you find the living situation isn't compatible, it's better to end the arrangement amicably than let tension build. Give proper notice, handle the deposit fairly, and part on good terms.

Disputes over deposits

Clear documentation at check-in and check-out prevents most deposit disputes. Photograph the room's condition when the lodger moves in and again when they leave. Be reasonable about fair wear and tear, and provide an itemised breakdown of any deductions. If you cannot agree, mediation services can help resolve disputes without legal action.

Insurance claims

If damage occurs and you need to claim on your insurance, having notified your insurer about the lodger ensures your policy remains valid. Keep evidence of the damage, correspondence with the lodger, and any relevant documentation to support your claim.

Moving forward with confidence

Taking in a lodger can be financially rewarding and personally enriching, providing extra income whilst offering someone affordable accommodation. The Rent a Room scheme's generous £7,500 tax-free allowance makes it particularly attractive for homeowners with spare space.

However, success depends on thorough preparation, clear agreements, and ongoing good communication. Understanding the legal differences between lodgers and tenants, meeting your tax obligations, maintaining appropriate insurance, and treating the arrangement professionally all contribute to positive outcomes.

For homeowners already managing rental properties, adding lodger income to your property portfolio is straightforward, especially with tools designed for UK landlords. August helps you track all your rental income, store essential documents securely, stay on top of compliance tasks with smart reminders, and maintain clear financial records across properties and lodger arrangements.

Whether you're taking in your first lodger or managing an established arrangement, staying organised, informed, and proactive ensures the experience benefits everyone involved. Review your permissions, prepare your agreement, understand your tax position, and approach the arrangement with realistic expectations and clear boundaries.

Disclaimer: This article is a guide and not intended to be relied upon as legal or professional advice, or as a substitute for it. August does not accept any liability for any errors, omissions or misstatements contained in this article. Always speak to a suitably qualified professional if you require specific advice or information.