It's time to raise the Rent a Room scheme threshold again
It has been a decade since the Rent a Room scheme tax-free threshold was last increased to £7,500 per year, after years of campaigning by SpareRoom. Since then, room rents in the UK have risen by a third.
SpareRoom is calling on the Chancellor to:
Raise the Rent a Room scheme tax-free threshold to reflect rents today and incentivise more under-occupied households to rent out rooms to lodgers.
Return much-needed supply to the rental market 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.
Why is this important?
The UK is in the midst of a housing crisis. There simply isn't enough affordable rented accommodation to meet demand and the supply-demand imbalance is keeping rents high.
There are an estimated 28 million empty bedrooms in England, Wales and Scotland. While not everyone is in a position to rent these out, freeing up just 5% of those rooms would provide affordable accommodation for 1.4M people1. This could be achieved without laying a single brick. Crucially, these rooms are spread throughout the country, meaning supply everywhere, not just in one location.
Lodger landlords contribute over a quarter of all rental supply to the flatshare market and their rooms are, on average, 9% cheaper than those advertised by regular landlords. In short, the rental market relies on lodger landlords to keep rents in check and yet – for the first time in years – supply of lodger rooms is now in decline2.
It's not just about affordability for people looking for rooms. Encouraging more people to share their homes with lodgers can help them avoid debt or repossession.
Mortgage rates shot up in 2022, following the government's failed attempt to restart the economy, and the effects are still being felt by homeowners across the UK.
In a January 2026 SpareRoom survey of lodger landlords, 25% said they relied on their lodger income to cover their mortgage repayments; 28% were either saving for retirement or topping up their pension incomes; and 12% were paying off debts or loans3.
What should the new threshold be?
If the tax-free allowance had risen in line with inflation, it would now be close to £10,400 per year4. Given the Government does not review the threshold regularly – the amount has not been increased for more than a decade – and given the same allowance applies across the UK without taking into account higher rents in major cities, we are calling for a new tax-free allowance of £11,000 per year.
At £11,000 per year, rents in 94% of UK postcode districts would fall within the threshold, up from just 41% of UK postcode districts which currently fall within the existing threshold of £7,500 per year5.
What difference would this make?
We know the current low threshold and the idea of self assessment for those who've never had to do it is really stressful and this deters people from homesharing. In July 2025, SpareRoom surveyed former lodger landlords and people who had expressed an interest in becoming lodger landlords but who weren't currently renting out rooms6:
83% said they would be more likely to rent out a room if the tax-free threshold was higher than £7,500 per year.
40% said they'd stopped renting out a room because their earnings would take them over the tax-free limit and they would have to complete a tax return.
Steven, South West London
Over several years, Steven and his partner rented a spare room in their home in London to three different lodgers. When they had their first child, they stopped. Recently, they extended their house and considered renting out a room again. However, when they looked at it again, they decided it just wasn't worth doing. Steven explains:
“It has been five years since we first rented out a room. When you throw in the cost of living and inflation as well as the huge spike in gas and electric costs, renting a room was going to take us way over the tax-free allowance. We would have to fill in a tax return, which neither of us has ever done in our lives before as salaried employees. Plus we are higher-rate tax payers, so we would be losing 40% of the rent above the allowance to tax in any event, so the incentive is just no longer there. During a housing crisis it really is a shame, and quite sad, to come to that conclusion as we genuinely enjoyed the experience and still speak to two of our previous lodgers and see them a few times a year.”
Charlotte, North London
“I had 10 lodgers between 2007 and 2024, two of whom became life-long friends. I stopped due to the ‘rent a room' tax relief being inadequate. This is my home, my sanctuary, and giving up my privacy to share with a lodger is not a small thing. If the government thinks that we, as homeowners, are a useful part of solving the housing shortage, then they need to make it more appealing. Or else more and more people will just stop like I did.”
Rent a Room Scheme: Timeline
1992
Rent a Room relief is first introduced with a £3,250 tax-free allowance under a Conservative government. Intention is to increase the quantity and variety of low-cost rented housing, giving more choice to tenants and making it easier for people to move around the country for work (source.)
1997
Annual tax-free allowance raised to £4,250 under a Labour Government, to increase the supply of low-cost housing and provide extra income for households.
2010
SpareRoom launches Raise the Roof campaign to lobby the UK government to increase the Rent a Room Scheme tax-free threshold in line with rents. 
2015
On the morning of the Summer Budget, SpareRoom gets an exciting phone call from the Chancellor's office, telling us that George Osborne will be announcing the annual tax-free allowance will be raised to £7,500, framed as part of efforts to increase housing supply and support the 'sharing economy'.
2016
New tax-free allowance kicks in from April. Wider public awareness causes growth in lodger landlords renting out rooms. Concerns are raised that the scheme is increasingly being used for short-term holiday lettings rather than just traditional lodgers.
2017
Government review launched in Autumn Budget, to look into whether the relief is still meeting its original purpose. Dec 2017 - Feb 2018: Public consultation takes place.
2018
No major changes to scheme but Government confirms relief should apply only where the owner is actually sharing occupancy for the rental period (source.)
2023
SpareRoom starts lobbying the Government to raise the threshold again.
2026
Annual tax-free threshold still £7,500. The good fight continues!
The intention of the Rent a Room scheme was to increase the quantity and variety of low-cost rented housing. However, because the scheme doesn't stipulate a minimum length of stay, it is also being used by those renting out furnished rooms to holidaymakers on sites like Airbnb. According to Airbnb, as of January 2023, 26.5% of its active listings were private rooms7. It's time this loophole was closed so the scheme can help renters as intended.
The graph below shows the number of ads placed by those renting out rooms to lodgers since 2012. The threshold last increased to £7,500 in April 2016 which was announced the previous year. It's no coincidence January 2017 is the highest month on record for homeowners offering rooms to lodgers. The numbers spiked and remained high after the threshold was increased, and then dropped dramatically during the pandemic.
“The UK is behind on its housebuilding targets, yet here's one common-sense change that would quickly ease pressure on what is now a very strained, and increasingly unaffordable, rental market. Any tax lost to the public purse by raising the threshold would be gained by taxing holiday lets. We have a housing crisis, not a hotel room crisis, so it's critical to disincentivise anything that channels supply away from the rental market.”