Do I need permission from my lender?
Most mortgage agreements allow you to rent out a room in your home, but you usually need to get permission from your lender. Check your mortgage agreement to see what it says. If it says you need permission, it’s important to get this before anyone moves in. If you don’t, you could be breaking your agreement and your lender may be able to take you to court.
If your lender refuses to give permission, get advice.
Will it affect my benefits?
Your benefits will probably reduce if you rent out a room. It might still be worth it, however, as you may end up with more income than you would get on benefits alone. It is important to inform the DWP as soon as you start receiving rent. If you don’t, you may have to pay back any benefits that you weren’t entitled to.
If you are receiving a means-tested benefit like income support (IS), job seekers’ allowance (JSA), or income-related employment support allowance (ESA) the first £20 each week that you receive in rent will not be counted as income. If you also provide some meals to your lodger, only half of what they pay you each week over £20 will be counted as income.
As an example, if you charged your lodger £60 per week for a room and some meals, the first £20 would not be counted as income. Half of the amount you charge above £20 will be counted as income which in this case would be £20. So, all in all, £20 of the £60 per week you are charging your lodger for renting the room would be counted as income when the amount of benefit you are entitled to is being calculated. If you weren’t providing any meals then £40 per week of the £60 the lodger pays would be treated as income.
What if I am on Universal Credit?
If you are receiving Universal Credit, the rent that you get from your lodger is not counted at all as income. You will still need to tell your work coach that you have taken in a lodger.
You will be responsible for the council tax. If you were previously living alone and were eligible for the 25% single person’s discount you will no longer be entitled to that once you have a lodger. You may however be eligible for other help paying your council tax – click here for more information.
Will I have to pay tax?
Under the Rent A Room scheme you don’t have to pay any income tax on the rent you receive if:
- you live in the same property,
- the room you rent out is furnished, and
- the rent you receive is not more £7,500 a year.
If you get more than this amount in rent, you can either pay income tax on the amount over the £7,500, or pay tax on all the rent and claim tax back on any expenses involved (such as buying furniture or providing services).
What are my responsibilities as a landlord?
If you rent out a room in your home, you will be responsible for:
Will it affect my contents insurance?
Renting out a room in your home may also affect your contents insurance. Many insurers will increase your premiums, but you should still inform them if you want to be sure that your belongings are protected from theft or damage. If you don’t, your insurance may not be valid.