HMO Landlords: Licensing Rules and HMRC Tax Treatment (England, 2026)

When an HMO needs a licence in England, the 2018 minimum room sizes, the 2023 council-tax change, and how HMRC taxes HMO rental income on the SA105 — grounded in GOV.UK and HMRC manuals.

Key facts (sourced) - Mandatory HMO licensing applies to any HMO occupied by 5+ people from 2+ households — Housing Act 2004 s.55. - Minimum bedroom sizes: 6.51m² (single adult), 10.22m² (two adults), 4.64m² (child <10) — SI 2018/616. - Mortgage interest fully restricted to a 20% basic-rate tax reducer — HMRC PIM2054. - Reported on SA105 alongside other UK property income — HMRC PIM1020.

Short answer

In England, a property let to 5 or more people from 2 or more households sharing facilities is a mandatory licensable HMO under the Housing Act 2004, regardless of the number of storeys. Smaller HMOs may still need an additional licence (set by the local council) or fall inside a selective licensing area. For tax, HMRC treats HMO income as a normal UK property business on the SA105 supplement — the same rental-business rules, finance-cost restriction and replacement-of-domestic-items relief apply.

In detail

When an HMO licence is mandatory

A property is a House in Multiple Occupation if it is occupied by people who do not form a single household and who share basic amenities such as a kitchen, bathroom or toilet. Since 1 October 2018 the mandatory HMO licensing threshold in England is 5 or more occupiers forming 2 or more households, with no minimum storey requirement. Operating a licensable HMO without a licence is a criminal offence that can attract an unlimited fine on conviction, a civil penalty of up to £30,000 per offence, and a rent repayment order of up to 12 months' rent.

See GOV.UK — House in multiple occupation licence and Part 2 of the Housing Act 2004.

Additional and selective licensing

Outside the mandatory scheme, a council can designate an additional licensing area covering smaller HMOs (typically 3–4 occupiers in 2+ households), or a selective licensing area covering most or all private rentals in a defined ward. Both schemes are made under the Housing Act 2004 and are local — the same street can be in or out of scope depending on the council's current designation. Landlords are responsible for checking the council's published register before letting.

Reference: GOV.UK — Private renting: houses in multiple occupation.

Minimum room sizes and amenity standards

The Licensing of Houses in Multiple Occupation (Mandatory Conditions of Licences) (England) Regulations 2018 set statutory minimum sleeping-room sizes for mandatory-licensable HMOs: 6.51 m² for a single adult, 10.22 m² for two adults, and 4.64 m² for a child under 10. Rooms below 4.64 m² cannot be used as sleeping accommodation. Councils may impose stricter standards through their own licence conditions and additional schemes.

Reference: GOV.UK guidance on HMO licence reforms and the 2018 Regulations on legislation.gov.uk.

How HMRC taxes HMO income

HMRC treats the letting of HMO rooms as part of a single UK property business under ITTOIA 2005, reported on the SA105 UK Property pages of the Self Assessment return. The same rules that apply to a single AST apply to HMO income:

Cash basis is the default for individual landlords with rental receipts of £150,000 or less. The accruals basis can be elected. (HMRC PIM1020 — Rental business: introduction).
Finance-cost restriction: interest on a mortgage used to buy or improve a residential HMO is not deductible as an expense. Relief is given as a basic-rate (20%) tax reducer. (HMRC PIM2054).
Replacement of domestic items relief: the cost of replacing (not initially providing) furniture, appliances, white goods and similar items in the let part of the HMO is deductible, net of any sale proceeds and any improvement element. (HMRC PIM3210).
Wholly and exclusively rule: communal-area costs that serve both the let rooms and any landlord-occupied space must be apportioned on a just and reasonable basis. (HMRC PIM2068).
Rent a Room scheme: where the landlord lives in the HMO as their only or main home, up to £7,500 of gross receipts per tax year may be exempt under the Rent a Room scheme. The scheme is not available where the property is run as a separate business with no resident owner. (GOV.UK — Rent a Room scheme, HMRC PIM4001).

Council tax and utilities

From 1 December 2023 an HMO that meets the statutory definition in the Council Tax (Chargeable Dwellings and Liability for Owners) (Amendment) (England) Regulations 2023 is treated as a single dwelling for council tax, with liability falling on the owner rather than the occupiers. This reversed the previous position where some councils issued separate bills per room.

Reference: GOV.UK — Council Tax: liability for houses in multiple occupation and the 2023 Regulations.

What this means for landlords

The HMO label triggers two separate compliance tracks: a housing track (mandatory, additional or selective licensing plus the 2018 minimum-amenity rules) and a tax track (SA105 reporting under the standard property-business rules, with the finance-cost restriction applied at basic rate). Whether a specific property needs a licence depends on the council's current designations, which can change between tenancies. The HMRC treatment does not change because a property is run as an HMO — the same allowable expenses, finance-cost restriction and replacement-of-domestic-items rules apply as to any other residential let.

Sources

GOV.UK — House in multiple occupation licence
GOV.UK — Private renting: houses in multiple occupation
Housing Act 2004, Part 2 (legislation.gov.uk)
Licensing of HMOs (Mandatory Conditions) (England) Regulations 2018
HMRC PIM1020 — Rental business: introduction
HMRC PIM2054 — Finance costs restriction
HMRC PIM2068 — Apportionment of expenses
HMRC PIM3210 — Replacement of domestic items relief
HMRC PIM4001 — Rent a Room scheme
GOV.UK — Rent a Room scheme
GOV.UK — Council Tax: liability for HMOs

Sources: - GOV.UK — House in multiple occupation licence: https://www.gov.uk/house-in-multiple-occupation-licence - GOV.UK — Private renting: HMOs: https://www.gov.uk/private-renting/houses-in-multiple-occupation - Housing Act 2004, Part 2: https://www.legislation.gov.uk/ukpga/2004/34/part/2 - Licensing of HMOs (Mandatory Conditions) (England) Regs 2018: https://www.legislation.gov.uk/uksi/2018/616/contents/made - HMRC PIM1020: https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1020 - HMRC PIM2054 — Finance costs: https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2054 - HMRC PIM2068 — Apportionment: https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2068 - HMRC PIM3210 — Replacement of domestic items: https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim3210 - HMRC PIM4001 — Rent a Room: https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4001 - GOV.UK — Rent a Room scheme: https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme - GOV.UK — Council Tax: HMO liability: https://www.gov.uk/government/publications/council-tax-information-letter-32023-changes-to-regulations-for-houses-in-multiple-occupation-hmos

Published: 2026-05-29.

Last reviewed: 2026-08-30.

General summary; not legal advice.