The government has been urged to raise the tax-free threshold and incentivise more under-occupied households to rent out rooms to lodgers.

Flat share site SpareRoom says the Rent a Room scheme, which hasn’t been updated since 2016, needs revising as new figures show that lodger room adverts fell 2.5% year on year in January.

SpareRoom wants the government to raise the tax-free threshold to reflect current rents and to also close the loophole that allows holiday lets to use the scheme.

Room offered ads posted by those renting out rooms in their own homes represent just over a quarter (26%) of all adverts on the platform. The peak in January 2017 came after the amount of tax-free income lodger landlords could earn was increased to £7,500 per year when the UK’s average monthly room rent was £573, keeping earnings well within the threshold limit which equates to £625 per month. Over the past five years, however, the UK average room rent has risen 29% from £580 per month in Q4 2020 to £749 per month in Q4 2025.

Searching

There are currently 2.4 renters searching per room available to rent in the UK, with demand dramatically higher in the most popular areas. However, there are also about 28 million empty bedrooms in England, Wales and Scotland.

Director Matt Hutchinson says the last time the Rent a Room scheme was altered, supply rose and remained at healthy levels until the pandemic. “We know the administrative burden of having to fill out a tax return does deter people from renting out rooms, so the tax-free threshold needs to reflect rents today,” he explains. “But we also want to stop those running holiday lets from using the scheme, so we can divert supply into the rental market. We shouldn’t be incentivising short-term holiday stays when there’s such a large supply-demand imbalance in the rental market.”

Around half of lodger landlords - 43% of whom are retirees - rent out rooms to help meet day-to-day costs such as food shopping, bills, or running their cars.

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