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Is your spare room collecting little more than dust? It could be earning its keep if you rent it out to earn some extra cash.

The start of the new tax year this week means the amount of money you can earn tax-free from letting to a lodger will increase from £4,250 to £7,500, as signalled in the 2015 summer Budget.

Taking advantage of increased Rent a Room relief is likely to benefit both you and your tenant given the increasing number of young people looking for low-cost lodgings in London. Although a number of companies pay their interns’ expenses, many millennials struggle to afford rising rental costs in the capital.

Advertise your room online on Gumtree, SpareRoom or EasyRoommate, and browse websites to compare prices of similar room rentals in your area. Double bedrooms in north London family homes are regularly available for about £550 per month.

Don’t want to commit to a longstanding lodger? Sign up to Room for Tea. This network connects interns in need of affordable and short-term accommodation in London with hosts willing to let out a room. Furthermore, all guests are verified through reference checks.

Some might be apprehensive at the thought of sharing their house with a stranger, but the ball is firmly in the homeowner’s court. Always meet potential lodgers, advertise specifically to young professionals and lay out the house rules (no overnight guests or exotic pets) beforehand.

Share your top money saving tips with FT readers, by tweeting us @FTthrift or comment on the FTthrift blog: FT.com/thrift.

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