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A housing charity is calling on an increase in tax breaks for people who rent out a room in their house to lodgers in an attempt to a make some extra money.

Currently, people who rent out a room in their home are allowed to earn £4,250 in rent before they are taxed. But Shelter argues that this amount hasn’t changed since it was set in 1997, even though the rents charged on rooms have more than doubled over the same period.

The charity says more homeowners may choose to rent out a room if they didn’t have to worry about tax repercussions. It says this would not only help people get a roof over their heads but it might also help a lot of people who are struggling to make ends meet and struggling to keep up with mortgage payments.

Kay Boycott director of policy and campaigns for Shelter says: “The current threshold is far too low and is likely to put people off letting out rooms due to the need for completion of a tax return and payment of income tax on the rental income.

“In the current economic climate, many homeowners are battling to meet their mortgage payments and many are looking for options to maximise their income. If the rent-a-room threshold was higher and the scheme better publicised, it could prove a real incentive for people to take in a lodger, and the take up of rent-a-room opportunities could increase.”

Shelter says that the threshold should be raised to £9,000 a year to reflect rising rents. It says this would make more efficient use of housing stock, while also supporting those who could benefit from an additional source of income.

If you are struggling to keep your mortgage under control, a lodger is a great way to earn some extra income. Talk to your mortgage adviser about making the most of your assets during this downturn.

SOURCE:  Shelter, 12/11/09

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