In the midst of a housing crisis George Osborne’s Summer Budget brought a seemingly small announcement with large consequences for homeowners and renters alike.
The Chancellor announced that from April 2016 the Government will increase the tax-free amount home owners can earn by renting out a room from the current rate of £4,250 to £7,500. This means that from the new tax year, all lodger income up to £7,500 is completely tax-free.
This is exactly what SpareRoom’s Raise the Roof campaign has been calling for for the last six years. As you can imagine, we were delighted to get a call from the Chancellor’s office to tell us the change was going into the Budget.
It may seem like a small change but it’s a massive win for everyone in the private-rented sector. Here’s why:
The extra income is going to make a huge difference to homeowners who are struggling to make ends meet. Whether the extra income helps them pay their mortgage when interest rates eventually rise or helps them pay for a new boiler, it’s money they otherwise wouldn’t have had in the pot.
Bringing the tax-free allowance in line with today’s rents (the allowance was last set in 1997 and rents have more than doubled since then) will act as a real incentive to homeowners to rent out their spare space. And with around 19 million empty bedrooms in owner-occupied properties in England alone, just 5% of those empty rooms would house almost a million people, that’s the equivalent of a city the size of Birmingham!
Freeing up unused bedrooms essential at a time when we’re not building anywhere near the number of new homes we need. Increasing the Rent a Room Scheme tax allowance will help create thousands of affordable rooms without laying a single brick.
Renters are feeling the pinch as much as, if not more than, homeowners and they benefit from this move too. Increased supply of affordable rooms means more choice for renters. Increased supply also means rent rises should ease, making renting more affordable.
The other good news for renters is that average rents for people living with the owner are £74 cheaper per month – that’s a saving of £888 over the year – than renting from a traditional landlord.
At last the Government is addressing the housing crisis with a simple, effective measure that will make a difference to hundreds of thousands of people quickly, while they work out the longer term policy changes we need to fix the housing crisis for good.
Thanks to everyone who signed the petition or helped spread the word over the past six years. Special thanks to Kate and the team at Propertychecklists.co.uk who officially supported the campaign and really helped build momentum.
The campaign isn’t ending here; it’s just the beginning in fact. In the coming months we’ll be working with the Government and others in the private-rented sector to help people who want to rent out a room but aren’t sure how to go about it so watch this space…
This is a guest article from SpareRoom
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