Rent your spare room
If you have a spare room that you wouldn’t mind letting out to somebody else, a student or somebody needing accommodation, possible for a few months, then you could rent it out and not pay any tax! At the moment you don’t have to pay tax on any amount of rent paid up to £7,500 a year under the Governments Rent a Room Scheme.
Some people worry that this a dangerous thing to do, but it can be quite risk free. I haven’t got a lodger at the moment as I haven’t got a spare room but I have had in the past and it was great. I had somebody in house if I wanted to go away, a built in babysitter, a man around if I needed anything lifting. One of my lodgers was a joiner and put down a laminate floor for me and helped decorate the house. He also had a couple of children who came and stayed over at weekends and played with my daughter! The second lodger wasn’t so helpful but he was quiet and tidy so no problem.
To qualify for the Rent a Room Scheme, you must be living in the same property as your lodger for at least some of the time they are renting from you. The room must be furnished and the only or main residence for some of the year. The scheme doesn’t include letting out a room to a company as an office, storeroom or garage. You can also use the scheme to cover other services, such as breakfast.
Remember this scheme only covers the rent you receive so you can’t claim for wear and tear and other expenses. It also doesn’t cover self-contained flats.
First of all you need to find somebody you can trust. You need something safer than Gumtree or Facebook. What you need is an agency that will vet potential lodgers for you. They have trained professionals who know your area and have a great reach and industry connections. They will do all the checks you need to do as well. I found my first lodger through one of these agencies (a friend of mine also told me what a lovely family he had!) and the second lodger through the same friend as she worked with him.
There are more legal requirements now than when I had lodgers. For example, you will need to make sure that the potential lodger is legally allowed to do so. Background checks will have to be done, such as finding out if they are legally allowed to live here. Get them to sign a form so that you can keep it on file.
The most important thing to do is to check with your mortgage lender that you are allowed to rent out a room, it may be forbidden under the terms of your mortgage. If you are renting, you will have to check that your lease will let you so check with your letting agent. Check your home insurance covers you for a lodger as well. You will also have to check with your landlord, insurer and lender that you can take part in the Rent a Room scheme.
When you have done all the legal checks for your property and got your shortlist of potential lodgers from the agency with all their checks done. It is a good idea to meet and interview them so that you can decide if you can actually live with them! Ask them why they want to rent the room and check whether they will be coming and going at night (that won’t be good if you have small children that are easily disturbed). Then get them to meet the family to make sure they get on with too. Finally, pick the person you like best!