Anyone who takes in a lodger will get a bigger tax break from next year.

Under current rules you can earn up to £4,250 a year tax-free from renting out a furnished room in the home you also live in.

But from April 2016 the tax-free amount will rise to £7,500. The current threshold has not changed in 18 years.

So from next tax year a basic rate taxpayer will save £650 a year if they get the full benefit of the change, while a higher rate taxpayer will be £1,300 a year better off.

On anything above the threshold it counts as income so you're charged at your applicable tax rate.

Martin Lewis
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If your rental income is less than the threshold, you don't need to do anything at all. If it's higher, you must complete a tax return - you can then opt into the scheme on your tax return and pay tax on the remaining amount.

If you use the allowance you won't be able to deduct expenses from the rental income you get. See more in our renting out a room guidance.

Summer Budget 2015: Tax break if you take in a lodger
Anyone who takes in a lodger will get a bigger tax break from next year