Q. I currently live alone and am considering taking in a lodger to help with the bills, etc. Can I do this without any issues arising?
A. In principle, there is nothing stopping you taking in a lodger at all. If you’re a mortgage payer, you will need to check whether it is permitted under your lender’s terms and conditions and similarly, those of your insurer. If you are renting, you will need to check your lease.
As far as the financial side of taking in lodgers is concerned, the Government positively encourages it, in the shape of its Rent a Room Scheme. This entitles you to earn up to £7,500 a year (around £625 a month) tax free from letting furnished accommodation in your home – whether you own it or rent it - as long as it is literally part of your home and not a separate dwelling with its own facilities. Up to that amount, you don’t even need to declare it on your tax return, as long as you register for the scheme.
However, there is no such thing as an entirely free lunch where the Inland Revenue is concerned. So, even though you are allowed a certain amount of tax free income under the scheme, you are not permitted to claim any expenses relating to the letting – for instance, wear and tear, insurance, heating and lighting or any other services you might provide for your lodger, like meals or laundry. Remember too that if you are currently receiving a single person’s discount on your Council Tax, then you will lose that as well.
Aside from making sure that the money side stacks up, taking in a lodger is actually pretty straightforward. Because they effectively share their landlord’s own home, lodgers don’t enjoy the same rights as tenants. For example, a lodger can’t go to a tribunal and formally challenge the level of rent you’re charging, nor are you obliged to give them the same amount of notice when you want to end the arrangement.
One final point. Where lodgers are concerned, you don’t strictly speaking need a formal contract. However, just to be on the safe side, I would draw up some kind of written agreement, covering things like which of your possessions the lodger can and can’t use, what time of the day they can use the kitchen, and so forth. We are always happy to help with this as well.