Not everyone likes the idea of a longer queue for the bathroom in the morning. Yet a growing number of homeowners are enjoying a tax-free income boost by taking in a lodger.
Householders can receive up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home. This is halved if you share the income with your partner or someone else and you can let out as much of your home as you want.
According to the latest figures the number of people renting a spare room has doubled in the past five years.
The rise of the landlord-lodger arrangement could help utilise the estimated 15 million unused bedrooms in England alone, giving renters more options and helping squeezed families and retirees cope with the higher cost of living.
Flat and house-share website SpareRoom.co.uk estimates there has been a 70% increase in the number of live-in landlords looking for lodgers across the UK since 2011. And in London, where housing need is most severe, the number has more than doubled during the same period (a 108% rise).
If you are thinking about taking in a lodger, there are a few key things to consider.
Even if you are renting a room out to someone you know, it’s best to have a formal written agreement. State how much deposit you need (this is usually a month or six weeks rent equivalent), how much rent, when it’s due and how it is to be paid. (If you’re unsure about how much to charge, find out about the cost of similar lodgings in your area).
The agreement could also have some provision for rent review and increases, for example on a yearly basis. You should state how much notice to leave is needed by either party, what meals and other services are to be provided, what you are both expected to pay for (how you will split bills for example), and which rooms and facilities your lodger is permitted to use.
Make an Inventory Agreement for the lodger’s room before they move in, to make any questions over whether the full deposit should be refunded on moving out more straightforward.
For your own benefit, as well as your lodger’s, it is essential that your property is safe. Check out all the safety basics before you rent out a room, such as gas and electrical fittings and appliances, and fire prevention.
It’s also important to remember that if you have a lodger and there is a theft (but no obvious sign of a break-in), an insurance claim is likely to be refused. Likewise, your lodger needs to know that their possessions are not covered by your contents insurance.
Remember, if you don’t tell your insurer that you’ve taken on a lodger, claims on your policy could be rejected.
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