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Taxation (UK) · Property and investment income

Rent-a-Room Relief for ACCA TX-UK Explained

Updated 11 October 2026 · Fact-checked

Rent-a-room relief exempts gross receipts of up to £7,500 a year from letting furnished rooms in your main home. If receipts are higher, the ordinary property income rules apply by default. You can elect for the alternative method instead: receipts less £7,500, with no expenses. This helps when your expenses are below £7,500.

Understand Rent-a-Room Relief and Furnished Holiday Lettings

Rent-a-room relief is a tax exemption for people who let furnished accommodation in their own main home. It is aimed at lodgers. The rent is compared with a fixed limit, not with your profit. The limit given in the ACCA tax tables is £7,500.

If your gross receipts from the letting are £7,500 or less, the income is fully exempt. The exemption is automatic. You do not pay tax on it and you do not report it. You also cannot claim any expenses, because the relief ignores costs. So the exemption is simple but gives no relief for costs. You can elect for the exemption not to apply, for example where expenses exceed receipts and you would otherwise have a loss.

If your gross receipts are above £7,500, the ordinary method applies by default. You compute property income as receipts less allowable expenses, and tax the profit. Alternatively, you can elect for the alternative method. You tax the gross receipts less £7,500, with no deduction for expenses. You would elect only if it gives the lower taxable figure.

The ordinary method wins when your expenses are more than £7,500. The alternative method wins when your expenses are less than £7,500. If expenses are exactly £7,500, the answer is the same either way.

The relief covers letting in your main home. Receipts mean the gross amount, including any payments for meals, laundry or services supplied to the lodger, not just the room rent. If the property is shared with other people, the limit is split between the people who receive the income, so each person's limit is halved (£3,750 each if two people share equally). Furnished holiday lettings are a separate topic and are not covered by this relief.

Key rules to remember

Rent-a-room limit
Exempt if gross receipts ≤ £7,500
The limit is £7,500 per year as given in the ACCA tax tables. Exemption is automatic. No expenses are deducted.
Alternative method
Taxable = Gross receipts − £7,500
Applies only if receipts exceed £7,500 and you elect. No expenses are deducted.
Ordinary method
Taxable = Gross receipts − Allowable expenses
Normal property income rules. Use it if expenses exceed £7,500.
Choice rule
Choose the lower of (receipts − £7,500) and (receipts − expenses)
This is the same as comparing expenses with £7,500.
Shared property
Limit is split between those receiving the income
For example, £3,750 each for two equal sharers.

How to solve Rent-a-Room Relief and Furnished Holiday Lettings questions

Use this method for any rent-a-room question.

  1. 1Check the letting is of furnished accommodation in the taxpayer's main home.
  2. 2Work out gross receipts for the tax year, including any payments for services such as meals or laundry.
  3. 3If receipts are £7,500 or less (adjust the limit if shared), state that the income is fully exempt and stop.
  4. 4If receipts are higher, compute the alternative method: receipts less £7,500.
  5. 5Compute the ordinary method: receipts less allowable expenses.
  6. 6Compare the two and choose the lower taxable figure. State that the alternative method needs an election.
  7. 7Carry the chosen figure into property income and then into the income tax computation.

Quickest way: Compare expenses with £7,500

When to use it: Use when receipts exceed £7,500 and the question gives expenses.

  1. If receipts are £7,500 or less, the answer is nil taxable income.
  2. Otherwise compare expenses with £7,500.
  3. If expenses are above £7,500, use the ordinary method (receipts − expenses).
  4. If expenses are below £7,500, elect for the alternative method (receipts − £7,500).
  5. Write one line of working for each method so you earn method marks.

Common mistakes in Rent-a-Room Relief and Furnished Holiday Lettings

  • Deducting expenses under the alternative method.

    Students treat it as normal property income.

    Fix: Under the alternative method, only the £7,500 is deducted. No expenses are allowed.

  • Applying the limit to profit instead of gross receipts.

    Students net off costs before testing against £7,500.

    Fix: Test the gross receipts against the limit. Ignore costs for the exemption test.

  • Taxing the full receipts when they exceed £7,500.

    Students think the relief is lost if the limit is passed.

    Fix: The excess over £7,500 is taxed under the alternative method. The relief is not lost.

  • Forgetting to halve the limit for shared income.

    Students miss that two people receive the rent.

    Fix: Split the limit between the people receiving the income, for example £3,750 each for equal sharers.

  • Choosing the alternative method automatically.

    Students assume the relief always helps.

    Fix: Compare both methods. If expenses exceed £7,500, the ordinary method gives a lower figure.

Worked examples

Example 1

Priya lets a furnished room in her main home. In 2025–26 she receives £6,800 rent and incurs expenses of £1,200. Compute her taxable property income.

Show the solution
  1. The room is in her main home and furnished, so rent-a-room relief applies.
  2. Gross receipts are £6,800, which is below £7,500.
  3. The income is fully exempt, so no expenses are claimed.

Answer: Taxable property income is nil. The £1,200 of expenses cannot be deducted.

Example 2

Tom lets two furnished rooms in his main home. In 2025–26 gross receipts are £11,000 and expenses are £2,500. Advise on the best method and compute the taxable amount.

Show the solution
  1. Gross receipts of £11,000 exceed £7,500, so the exemption alone does not apply.
  2. Alternative method: £11,000 − £7,500 = £3,500.
  3. Ordinary method: £11,000 − £2,500 = £8,500.
  4. The alternative method gives the lower figure. Expenses of £2,500 are below £7,500.
  5. Tom should elect for the alternative method. Otherwise the ordinary method (£8,500) applies.

Answer: Taxable property income is £3,500 if Tom elects for the alternative method. Without the election, the ordinary method gives £8,500.

Exam tips

  • Write both calculations in Section C. The marker can then award marks even if you choose the wrong method.
  • In objective questions, check whether the room is in the main home and whether the income is shared.
  • Always use gross receipts for the £7,500 test.
  • Say clearly that the alternative method needs an election. This is an easy mark.
  • Remember that the £7,500 limit is in the tax tables supplied, but you must know how to apply it.

Practice questions from Property and investment income

Rent-a-Room Relief and Furnished Holiday Lettings in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Rent-a-Room Relief and Furnished Holiday Lettings: frequently asked questions

What is the rent-a-room limit in TX-UK?

The limit given in the ACCA tax tables is £7,500 a year. Gross receipts up to this amount from letting furnished rooms in your main home are exempt.

What is the alternative method for rent-a-room relief?

It taxes gross receipts less £7,500, with no deduction for expenses. You elect for it when receipts exceed £7,500. It is better than the ordinary method when your expenses are below £7,500.

Can I claim expenses if my rent is under £7,500?

No. The exemption applies automatically and no expenses can be deducted. However, you can elect to disapply the exemption and use the ordinary property income rules. This is relevant if expenses exceed receipts and you would have a loss.

What happens if two people share the rent?

The £7,500 limit is split between them. Two equal sharers each have a limit of £3,750.