Overview
- The 2025 Budget extended the freeze on income tax thresholds to April 2031, keeping the personal allowance at £12,570 and increasing fiscal drag as more people move into higher bands.
- HMRC’s Rent a Room Scheme allows individuals who live in their property to receive up to £7,500 per year tax-free from letting furnished accommodation.
- Combining the £12,570 personal allowance with up to £7,500 from Rent a Room can raise an individual’s total tax-free income to £20,070.
- The relief applies only to your main residence, excludes buy-to-let properties, and the allowance halves to £3,750 if the rental income is shared.
- Earnings at or below the threshold are automatically exempt, but those over it must file a self-assessment to opt in, with the option to opt out and use standard property accounting if that is more beneficial.