A review of the rent-a-room scheme hidden in last week’s Budget announcement may have big consequences for the growing number of online short-term letting companies such as Airbnb and SpareRoom.
The announcement, which was hidden in the budget text and not referred to during the Chancellor during his speeach in Parliament on Wednesday reveals that the government is to review the ‘rent-a-room’ tax relief given to home owners who let single room within their properties.
Tax experts believe the government is likely to set a minimum number of days that a tenant must stay in the property to attract the zero rate of tax on any income.
Introduced in 1992 rent-a-room relief enables home owners to earn up to £7,500 a year tax free from letting out a spare room in their home, which was raised last year from £4,250.
But the scheme has helped prompt the rapid rise of short-term online room rental sites, in particular Airbnb – which now offers over 25,000 private rooms to rent in London, data from consultancy Airdna shows.
The Budget announcement reveals that the government believes the relief, which was designed to enable struggling home owners to earn tax-free income and increase the market for longer-term lettings, is now being used to fuel the huge growth in short-term lettings instead.
The details of the announcement also say that, after consulting on proposals to redesign rent-a-room relief, it will be aligned to fit more closely with its intended purpose.
The call for evidence on the rent-a-room tax will be published this week on Friday, December 1st.
According to data from SpareRoom there are 19 million unused bedrooms in the UK.