Rent a room threshold to rise - 2016/17

Rent a room

The Chancellor has announced that the amount that householders can earn by renting out a room will rise to £7,500 a year tax-free.

The Rent a Room Scheme previously allowed a householder to earn up to £4,250 a year tax free from letting out furnished accommodation in their home.

Solihull MP Julian Knight was responsible for making this Budget submission to the Chancellor earlier this month.

Matt Hutchinson, director of flat and house share site, which has campaigned to get the threshold raised, says: "The Chancellor's change to the Rent A Room scheme has potentially huge implications for the scarce supply of affordable rented accommodation.

"In the midst of a housing crisis, and with building levels behind all forecasted targets, it's vital we make better use of existing stock and this will do just that. All too often housing initiatives benefit a select few - but this helps millions of renters and homeowners.

"There are an estimated 19 million empty bedrooms in owner-occupied properties in England alone. Freeing up just 5% of those rooms would accommodate almost a million people – the equivalent of a city the size of Birmingham.

"Encouraging people to take in lodgers could help them avoid repossession when interest rates rise and their mortgage repayments are adjusted. Lodger landlords can earn, on average, £8,335 per year in London, and £6,071 across the rest of the UK.

"The Rent a Room Scheme threshold has remained unchanged at £4,250 for 18 years. Only a fifth of UK towns and cities have average room rents of below that mark, while all rooms in London are way outside of the threshold."