Average rent from lodgers jumps more than 5%

Good news for those planning to let out a room, ahead of the Rent a Room Scheme changes next year.

The average rent from a lodger has risen by 5.7% over the last year, according to research from Spareroom.co.uk. 

The biggest room rent rises were in the various capital cities of the UK, with Cardiff seeing rents surge 10.7% since 2014, followed by Edinburgh at 10%, Belfast at 8.7% and London at 5.3%.

Unsurprisingly London is also the city where you can make the most by letting out a room, at an average of £8,328 a year. The next best income is in Aberdeen at £6,240 a year, while at the bottom of the scale homeowners in Belfast make an average of £3,756 by taking in a lodger.

Here's how the big cities and towns that Spareroom looked at compare when it comes to lodger income:

Tax breaks rising

At present if you earn more than £4,250 a year from lodgers you have to declare it and pay Income Tax under the Government’s Rent a Room scheme. This means homeowners letting out a room in almost three quarters of the UK’s 30 biggest cities are having to pay tax.

But from April 2016 the amount you can earn before you have to pay tax is rising to £7,500. This will lift live-in landlords in 29 out of the 30 cities out of the tax bracket. This means from next April only those letting out a room in London are likely to have to pay tax. Londoners make an average £828 a year above the threshold, while the next largest average annual income is over £1,000 below the threshold.

“The increase to the Rent a Room Scheme threshold is long overdue, having remained fixed since 1997,” says Matt Hutchinson, director of SpareRoom.co.uk. “The extra cash could really help when interest rates rise and mortgage payments follow.”

For more, read Rent a Room Scheme: Tax-free cash from your spare room.

Good news for renters

The rising tax threshold isn’t just good news for landlords. Being able to earn tax-free cash could encourage more people to rent out a room, increasing the supply for those renters struggling to find somewhere to live.

“It’ll be interesting to see what happens in the run up to April. It’s likely many will start taking advantage of the current tax break this tax year,” says Hutchinson. “Freeing up just 5% of the 19 million spare rooms in England alone would accommodate almost a million people, the equivalent of a city the size of Birmingham.”

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