I didn’t go to university so was quite late into the game moving out of my mums, but when I did if felt like the day that I got my driving licence. There was a sense of freedom knowing that I could be out to all hours, have whoever I wanted around and was going to really find whether I could hack it in the big scary world on my own.
My mum had done everything up to that point, dinner, washing paying the bills you name it was done for me. surprisingly moving out was the best thing that i had ever done and I absolutely loved it. The thing is as many tenants will know they are at the mercy of the landlord, will they increase their rent will they decide to sell and if they do what will i do.
My experience as a lodger
This is exactly what happened, the flat that I was living in had obviously increased in price and my landlord felt it was the right tome to sell, but what did this mean for me? would i be able to find a new place at the same price and if I was going to be moving in with someone else would they be as clean as my earlier fellow tenants.
Unfortunately I wasn’t able to find somewhere new in my notice period and had to move back into my mums. I was only there for a week before I knew that it didn’t feel right so I searched the rent a room websites and found somewhere that I thought was perfect, it was close to work and in an area that I knew close to friends.
When I went to see the room it turned out to be a lovely couple that had recently moved into the property. They where looking for someone to move in to aid with paying their mortgage. The room was on the third floor and on a different floor to the one and only bathroom. In my excitement to get out from under my mums feet again I accepted their terms and moved into the property.
This was their home and as such I was a lodger. My mindset of a lodger was completely different to that of when I was a tenant. Something that I didn’t really consider when moving. I tried to make sure that I cooked my dinner before the owners came home as to not be under their feet and spent most of my time in my bedroom when not out with friends even going to the one and only bathroom was an issue, maybe I had been spoilt as my earlier place had an en-suite.
Now that I’m a home owner could I take in a lodger?
I read a lot of personal finance blogs and a majority of the bloggers agree that taking in a lodger is a fantastic way to make a little extra cash on the side and I couldn’t agree.
We have space to take in a lodger, the thing is a number of considerations unrelated to making a little extra cash that puts both my wife and I off.
- This is our home and our retreat from the craziness outside!
- Not everyone is going to be a considerate lodger?
- Could we trust them if we went away?
- Would it be fair to impose restrictions that they wouldn’t have if they rented?
So you’ve decided that you want to rent a room
If you decide that taking in a lodger is still something that you want to do, it might be worth signing up to the Rent a Room scheme. This enables you to earn up to £7,500 or £3,500 if renting the accommodation jointly.
What is the Rent a Room Scheme?
Introduced in 1992 the scheme allows you to earn up to £7,500 or £3,500 if renting the accommodation jointly.
To benefit from the scheme you have to be an owner occupier or a tenant letting out a fully furnished property that is your main home. If you are a tenant please ensure that you are not breaking the terms of your tenancy
If you rent a room and you decide upon a price that is going to mean that you are going to be earning more than the threshold, you’re going to have to fill in a tax return i’m afraid. Here you can opt into the scheme and claim the tax free allowance or choose not to opt in and fill in the relevant information on the property pages of the tax return.
You might need to pay tax if you earn more than £7,500. See the two options for paying tax
Advantages of taking in a lodger
- The scheme could help you pay your mortgage or pay off debt sooner
- It allows you to earn £7,500 a year tax free
- you’re able to give less notice than if you were renting our your property
- You are able to enter their room at any time.
- You are able to set up either a fixed term agreement or periodic agreement
Disadvantages of taking in a lodger
- Do you want someone you don’t know having access to your property
- If they refuse to leave your home you will need to go to court to evict them.
- You will need to complete a tax return if you earn more than the threshold
Some other considerations
- Does your mortgage company allow you to rent a room
- Are there any restrictions on your home insurance
- It could affect any benefits that you receive
- If you live alone, you will no longer be able to benefit from the 25% council tax discount
Will they be an excluded occupier?
The notice period that you have to give a lodger considered as an excluded occupier differs to that of the one that you would have to give a tenant in that the law says that you have to give them “reasonable notice”, which is usually the governed by the term of your rental agreement with them. So if you pay weekly, a weeks notice would be deemed reasonable notice.
A lodger is deemed to be an excluded occupier if they 1) live in your home and 2) you share living space with them.
How to find a lodger and what to do when you have found one
Once you have found your lodger you should make sure that you are both clear of the terms and responsibilities of their tenancy. A lodger agreement is a perfect way of doing this. You can get one through legal stationers or buy directly from SpareRoom for £7.50 for a download only copy or £9.99 to include a hard copy.
For more information on taking a lodger you should also check out The Lodger Guide