Taking in a lodger guide

Understanding the implications of taking in a lodger
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taking in a lodger

Taking in a lodger can be a great way to boost your household income if you have a spare room and you can also benefit from having someone on hand to feed your cat or walk your dog when you can’t, and you might even make a friend! If you live on your own, you may also feel that your home is more secure with a lodger there when you’re away with work or on holiday.

However, before deciding whether taking in a lodger is definitely the right option for you, make sure that you’re comfortable about sharing your house – including the bathroom and kitchen – with a stranger and with the associated loss of privacy.

Ready to go ahead? This guide to taking in a lodger for beginners will help you understand what you need to know to get started as a live-in landlord.

Check you have the right to rent out your spare room

If you own the freehold of your home outright, this is obviously not a problem. But if you’re a homeowner with a mortgage, or if you’re a tenant, or if you only own the leasehold to your home, you need to make sure that your mortgage lender, landlord, or leaseholder is happy for you to do this. This is generally not a problem, but you can save problems later on by being open about your intentions. Most local authorities, housing associations and private landlords are open sub-letting rooms, especially if doing so reduces the likelihood that you will default on your rental payments to them.

The impact of taking in a lodger on your Council Tax

Many councils allow householders to claim a discount on their Council Tax if they are the only person aged 18 or over at their address. If this is your situation and you take in a lodger, you need to tell the council that you’re no longer eligible for the single person discount.

The impact of taking in a lodger on your home insurance

The number of people living in a property is one of the many factors that home insurance providers use when calculating the risk that a policy holder will have an ‘insured loss’. This is why you need to let your insurer know if you take in a lodger.

Income tax implications of taking in a lodger

The Government’s Rent a Room Scheme allows you to earn up to a threshold of £7,500 per year (or £625 per month throughout the year) tax-free from letting out furnished accommodation within your home. This is halved if you share the income with your partner or someone else. 


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Taking in a lodger: an essential legal guide

Confirming your lodger’s right to rent

You have a legal obligation to check that your lodger has the ‘right to rent’ which means that they are allowed to live in the UK. This involves asking them for suitable documents, and keeping a copy of what they provide. The Government portal gov.uk provides a detailed list on which documents are acceptable. It’s essential that you do this check for everyone you plan to have as a lodger and not just for people whom you think may not be British citizens.

Ending your lodger’s tenancy

If your lodger shares a kitchen, bathroom or living room with you (as happens in the majority of situations), you only need to give them ‘reasonable notice’ verbally or in writing when you want them to move out. This is usually the length of their rental period, for example, a month if they pay you monthly. After this period, if they haven’t moved out, you can change the locks but you must still give them back their belongings when asked.

Taking in a student lodger

If the room you want to let out is quite modest and would only command quite a low price, a student might well be the perfect lodger for you. That said, if you live in an area with a lot of higher education establishments and not enough halls of residence, you may be pleasantly surprised by the level of rent you can achieve.

Make sure you agree clearly upfront whether the student is expected to pay rent during academic holidays when they’re not living with you and whether you want them to clear their room of all their belongings if they’re not there. A practical compromise is for them to pay (and not remove their possessions) during the Christmas and Easter, but not during the longer, summer vacation. You might then be able to let the room out, if you want to, on a short-term basis.

Taking in a lodger on benefits

Your lodger can claim housing benefit so long as he or she is not closely related to you.

Taking in a lodger while on benefits

How income from lodgers affects your finances depends on whether or not you’re claiming Universal Credit.

If you are claiming Housing Benefit

When taking in a lodger Housing Benefit is not affected if your income from your lodger is £20 or under but above that sum, your Housing Benefit is reduced. If you’re in this situation, it’s therefore important that you calculate whether taking in a lodger will improve your financial situation or speak to your benefits office to get help with this. A related point to remember is that having a lodger in your spare room means that the room is no longer considered ‘extra’ so your Housing Benefit is not reduced as a result of your having a house that is ‘too big’ for your household.

It is always important to keep good records when you have a lodger, including the date each rent payment was received, the period it covered, and whether it included meals. Record keeping is particularly important when you are taking in a lodger while on benefits.

If you are on Universal Credit

The situation for Universal Credit claimants with lodgers is almost totally different as the rental income you receive is not counted as income but your lodger or lodgers also don’t count when your bedroom entitlement is calculated.

Frequently asked questions

Will taking in a lodger affect my benefits?

If you’re claiming Housing Benefit, this will be reduced if you earn more than £20 a week from a lodger. If you provide your lodger with meals, only 50% of your income over £20 is used as the income sum which affects your housing benefit calculation. Having a lodger occupy your spare room does, however, exempt you from the ‘bedroom tax’.

Taking in a lodger does not affect Universal Credit payments.

Should I take in a lodger?

To make this decision, work out both the financial impact (taking into account rental income but setting insurance, Council Tax, loss of benefits, utility bills and maintenance costs against this), and the social impact of adding someone to your household. If you’re unsure give it a try by looking for a short-term lodger to see whether it suits you.

 

I had seemingly normal conditions of living in a house with a lodger who was a full time university student. However it is shocking to see how many providers do not provide cover for this situation. HomeProtect came to the rescue. - Review Centre Thursday, 21 September 2017

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Satisfied customers

Made my life so easy when taking in lodgers and revising the policy. Highly recommended. Very competitive pricing too. Review Centre, 6 July 2016
Really good service, allowed me to have a lodger in my house without paying a fortune. Review Centre, 8 July 2016
Website was clear, which meant my contents insurance was sorted very quickly and easily - thank you! Review Centre, 12 January 2017