Individuals should be able to earn £10,000 a year tax-free in the "sharing economy" by renting out their spare rooms, cars or other assets, a business leaders' group has said.

A growing number of householders are making money by renting out all or part of their homes temporarily to strangers through websites like Airbnb, and other schemes allow people to hire assets ranging from vehicles to tools, musical instruments, parking spaces and even dogs to take for a walk.

The Institute of Directors urged the Government to support the trend by extending the existing Rent A Room scheme, which permits a tax-free income of up to £4,250 from overnight stays, to cover other shareable assets.

As a first step, the allowance should be raised to £6,960 to take into account inflation since its creation 18 years ago, before being raised in line with the current personal allowance of £10,000, said the IoD.

In a report,Share the Wealth, the IoD warned that 45 per cent of members said they would not feel comfortable interacting in a sharing economy with people they do not know, against 35 per cent who would.

Author, IoD deputy head of policy Jimmy McLoughlin, said: "At its simplest, the sharing economy is about letting people make the most of their assets and the Government should establish a tax regime that encourages and supports this."