Letting a room to a lodger

Households across the UK have taken in an extra 600,000 lodgers in the past year to help pay the bills, with more than one in 20 Londoners letting rooms, according to research by Abbey.

As well as giving homeowners some extra cash, the lodging trend may also reflect the increased number of prospective first-time buyers lodging while they save for deposits in these uncertain times.

What can you earn?

A room at a premium address in a central area can rent for £800 a month, says Spareroom.co.uk, while the average UK rent is £393 a month - or about £4,700 a year.

What about tax?

Live-in landlords can legitimately avoid tax on much of their extra income, receiving £4,250 of rent a year tax-free - regardless of their other income. To qualify for the allowance, the let accommodation must be furnished and can be a single room or a whole floor, but the property must be your only or main home.

Landlords don’t need to do anything to get the tax break if the rent is below £4,250 and they don’t normally file a tax return. Those earning higher rents are expected to tell their tax office, and claim the allowance through their returns. The allowance is reduced to £2,125 each for people who jointly own properties and applies in full to tenants who are allowed to sub-let.