Decade of frozen relief discouraging homeowners from renting spare rooms
Outdated tax reliefs are discouraging homeowners from renting out spare rooms, affecting the supply of affordable rental accommodation, warns the Association of Taxation Technicians (ATT).
Since 1992, taxpayers have been able claim an income tax exemption known as rent-a-room relief on rental income from a lodger in their home. This relief means their rental income is not taxed where the gross amount before expenses is below £7,500, or £3,750 if shared between joint property owners.
However, the threshold has not been increased since 2016, during which time the average UK property rental cost has increased by 45%.1 Had the rent-a-room threshold increased in line with inflation, it would be around £10,500 by the start of the 2026/27 tax year.
The ATT warns that failure to increase the rent a room limit could discourage taxpayers from renting out rooms in their home, reducing the supply of spare rooms available to lodgers. As part of its report on outdated tax reliefs and allowances,2 the Association added that the frozen threshold makes it especially difficult for those who are unable to afford to rent a full property themselves to secure affordable housing.
Jon Stride, chair of the ATT’s Technical Steering Group, said:
“With housing and rental costs continuing to rise, the rent a room allowance is vital in helping people find accommodation, especially for those on lower incomes and in areas of higher rental costs, such as London and other large cities.
“Failure to increase the limit over the past decade has made it a less attractive scheme for homeowners, impacting the availability of affordable accommodation. A shortage of rooms to rent restricts mobility and could act as a disincentive for those looking to move within the UK for work or study.
“We would urge the Government to look at increasing the relief and reviewing it regularly to support both homeowners and renters.”
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