SpareRoom calls for tax break to unlock millions of empty rooms

A flatshare website is urging the Chancellor to raise the Rent a Room tax-free allowance in the Budget to encourage more households to take in lodgers and boost rental supply.

The scheme allows people to earn up to £7,500 a year tax-free from renting out furnished rooms in their homes, but the threshold has remained unchanged since 2016.

SpareRoom estimates there are 28 million spare bedrooms across England, Wales and Scotland. While not all are available to rent, the website says freeing up just 5% could provide affordable accommodation for 1.4 million people.

Increase the threshold

Matt Hutchinson, director at SpareRoom, said: “Not a single brick needs to be laid to boost lodger rental supply. Simply increase the threshold, awareness grows, and rooms hit the market. We saw this play out in 2016 and there’s no reason it shouldn’t work again.

“Right now, you can only earn £625 per month in lodger rent before you have to declare the income, which isn’t reflective of rents today. As a result, people are pushed into completing a tax return, which we know from having spoken to plenty of would-be lodger landlords is a significant deterrent. For an incentive to work, it needs to keep pace with the times.

“It’s also really important to keep this supply in the rental market, where it’s so desperately needed. That could be achieved by adding a 31-day minimum stay requirement to the scheme’s terms, closing the loophole that allows people offering holiday lets to benefit from this tax relief.”

Lodger rooms in decline

SpareRoom adds that in Ireland its annual rent-a-room relief threshold will increase from €14,000 to €16,000 next year.

According to SpareRoom’s data, in the third quarter of 2026, lodger rooms made up a third (34%) of total UK flatshare supply, yet these are now in decline, falling 1.4% year on year.

In inner London, lodger rooms make up 17% of total supply and are also falling year on year (-2.9%).