A couple of months ago we looked at the Rent a Room Scheme and how it allows you to earn up to £4,250 a year tax free by renting out a spare room in your house. Clearly we could all do with an extra £4,250 a year but it’s not as simple as placing an ad for your room and taking the first person who comes along. Here’s the first part of our guide to taking in a lodger to help you through the process and make sure you’ve thought of everything in advance.
The first rule of taking in a lodger is:
Preparation, preparation, preparation
Letting someone into your home is a totally different kettle of fish to renting out a buy to let property. There are several reasons for this but there’s one that stands out way ahead of all the others:
It’s your home and you’ll have to live with them.
This makes you more vulnerable than the traditional landlord who doesn’t live with his or her tenants. Luckily the law recognises this and makes certain provisions for live in landlords (as we’ll see in future parts of this guide). That’s why it’s more important than ever to do your homework before you even think about advertising your room. We’ll look at how to place and advert (and where) later on but, before you get anywhere near advertising, there are a few things you need to do to help get the process off to a smooth start.
Don’t forget, the more you prepare in advance the better you stand a chance of avoiding nasty surprises further down the line.
First things first – what you should check before you do anything else
- Check with your mortgage lender, landlord or local authority to make sure it’s OK for you to take in a lodger. The Rent a Room Scheme isn’t restricted just to homeowners but there may be restrictions in your contract (this is less likely if you own the property, and the freehold, but it’s worth checking).
- Give your insurance provider a call. Some insurance companies are funny about contents insurance if you take in a lodger (especially if you don’t tell them in advance) so ask them if it will affect your cover. If it does you can always check if someone else will cover you; even if the premiums are higher you’ll be gaining in rent so it’s worth investigating.
- If you receive benefits you should contact your benefits office as it’s likely your benefits will be affected by taking in a lodger.
- Let the council know if you claim a single occupancy discount on your council tax. You won’t be eligible if you take in a lodger (unless they’re a full-time student) but you can charge an amount towards the difference in the rent or as part of the bills.
OK, that’s the preliminaries dealt with. In the next post we’ll look at preparing the room itself and working out how much you can charge for it.