The Government is being urged to increase the tax-free allowance given to people who rent a room to a lodger as it has remained static for over a decade.

The 4,250 annual threshold below which you pay no tax has been in place since 1997. Campaigners say in that time typical rents have risen by 113%.

This means far more will have to pay tax on their rental income. The website,, which is spearheading the campaign, wants the limit raised to 9,000.

It says almost 60% of people who rent out a room in their home receive income above 4,250, rising to 91% in London (see the Boost Your Income guide)

It adds that raising the threshold could prevent homeowners falling into arrears on their mortgage or having their property repossessed.

Spareroom's Matt Hutchinson says: "Renting out a room can be the difference for some homeowners between losing their home and keeping it.

"Raising the threshold will allow thousands to avoid repossession and arrears and can only have a positive effect on the economy as a whole."

You get the allowance if you let a furnished room or floor in your only home or your family home. The scheme does not apply to unfurnished rooms.

Renters who sub-let also get the allowance though not all leases allow this.

The Government is refusing to confirm whether it will consider increasing the threshold but it appears unwilling to do so.

A spokesman says: "There is no evidence to suggest increasing the threshold would encourage homeowners to consider taking in more lodgers than they do at present."

Further reading/Key links

Make cash: Boost Your Income
Tax rates: 2009/10 tax breakdown