Under the current Rent a Room Relief rules, homeowners can earn up to £7,500 per year tax-free from letting out part of their home on a furnished basis.
Homeowners Alliance says it is time the scheme was brought up to date to offer relief that reflects the real cost of renting to make the scheme more appealing.
“Under the current scheme, homeowners can rent a room in their home, helping them to afford soaring mortgage payments,” said Paula Higgins (pictured), chief executive of Homeowners Alliance. “We successfully campaigned in 2015 to get the Rent a Room Relief increased so that £7,500 of any income is tax free. But this figure hasn’t been revised since. We think there is no better time – when the UK is buckling under a cost-of-living and housing crisis – to extend the tax-free earnings.”
The average cost to rent a room in the UK stands at £8,868 per year or £12,168 per year in London, according to flat-sharing website Spareroom.com.
Homeowners Alliance wants to see the tax-free allowance rise to £10,000 and increased annually.
The group also wants the Chancellor to update the rules of the Lifetime ISA (LISA) by removing the withdrawal fine for those who buy a home above the current £450,000 price limit. Furthermore, it wants to see an end to stamp duty for everyone except investors and second homeowners.
Higgins added: “The financial penalty is so great, it stops people moving home. Stamp duty stops elderly people from downsizing, it stops families stepping up the ladder and stops homeowners making a sideways move, perhaps for work or family reasons. The ensuing inactivity limits the number of properties to choose from when buying, at a time when housing is in short supply.”
