Rental income from lodgers is exempt from income tax up to a threshold of £4,250. This threshold has not changed since 1997/98, even though rents in most parts of the country have more than doubled. ‘Rent-a-Room’ was originally set up to encourage people to rent out spare rooms, but given the significant rent increases over the past 12 years the value of the benefit has dwindled.
Sixty per cent of rooms in the UK are rented for more than £4,250 per year. In London this figure rises to 91%. Even more startlingly, 78% of UK homeowners could cover the average mortgage arrears by renting out a spare room.
The NLA is supporting the ‘Raise the Roof’ Campaign launchedd by flat and house-share website Spareroom.co.uk, which is lobbying for a tax-free threshold increase to £9,000 per year. Not only could the increase help to prevent repossessions but it could add much needed affordable housing stock.
David Salusbury, Chairman, NLA, said: “There is no way of telling just how many potential ‘live-in’ landlords are not letting out their spare rooms because of the hassle-factor of having to complete a self-assessment tax form. Today we are sending a clear message to the Chancellor: a fair deal for those looking to rent a room by increasing the tax-free threshold will help homeowners and the economy. It is a win-win situation that helps both parties and it is about time the exemption reflected the increase in market rents.”
