From April 2016 the threshold will be raised from £4,250 to £7,500 per year, allowing homeowners in all major UK cities barring London to rent out a typical room tax-free.
Freeing up 5% of the 19 million spare homes in England alone would provide rooms for almost a million people.
SpareRoom.co.uk’s director Matt Hutchinson said: “The increase to the Rent a Room Scheme threshold is long overdue, having remained fixed since 1997. The extra cash could really help when interest rates rise and mortgage payments follow.
“It’s great news for renters too. In the midst of a housing crisis, and with building levels lagging well behind required targets, the new Rent a Room Scheme threshold should incentivise more cash-strapped homeowners to let their spare rooms, increasing the supply of affordable accommodation and reducing the pressure on rents.
“It’s something we campaigned for over six years, so we were thrilled to get a call from the Chancellor’s office on budget day to let us know it was happening. Even if we build at the levels we need we’ll only increase housing stock by 1 or 2% a year so making better use of existing stock is vital.
“It’ll be interesting to see what happens in the run up to April. It’s likely many will start taking advantage of the current tax break this tax year.”
Based on data between January and June 2015 in London the typical monthly lodger rent was £694 per month, or £6,240 per year, while second and third were Aberdeen (£520 and £6,240) and Brighton (£510 and £6,120).
Lodger rents increased most considerably year-on-year in Cardiff (10.70%) and Edinburgh (10.0%) to £402 and £484, or £4,824 and £5,808 per annum.
