For tenants struggling to pay the ‘bedroom tax’ or spare room subsidy there is a little publicised fact that the Tenants’ Voice would like to draw to your attention.
Prior to Universal Credit being introduced people claiming welfare benefits had to declare income that they received from lodgers and such income could affect their entitlement to income support, jobseeker’s allowance and housing benefit. However, due to an amendment that was made in the Universal Credit draft regulations by ministers, as to what constitutes income, benefit claimants are able to retain their full entitlement to benefit and still keep any rent they may receive from lodgers.
Up to £4,250 in tax-free rental income
By renting out your spare room to a lodger, some councils have advised tenants that they are able to keep up to £4,250 of the rent without having to pay tax on it. This effectively means that they can compensate for any reduction that is made in their benefits because of the ‘bedroom tax’
Whilst the CEO of the TaxPayers’ Alliance,Matthew Sinclair, stated that the prospect of tenants making a legitimate profit from social housing would be of extreme concern to taxpayers, it is the view of the DWP (Department of Work and Pensions) that allowing tenants to take in lodgers will actually make better use of social housing.
So for tenants struggling to pay the ‘bedroom tax’ this may just be a solution to your problems but before you get carried away with the euphoria of it, there are certain things you need to consider when taking in a lodger.
If you have never had a lodger before, as most tenants won’t have, you need to work out the house rules in advance. This might not seem necessary but defining your terms and conditions will avoid any misunderstandings, difficulties or problems that may arise whilst the lodger is in residence.
Where to find a lodger
If you have a university or college near you the Students’ Union will often allow you to advertise your spare room with them. Students are a good bet as lodgers.
If the company you work for has a human resource department, let them know about your spare room since they may know of someone looking for one.
There are a number of online portals where you can advertise a spare room and of course, you can place a card on your local supermarket notice board or in the newsagent’s window.
Get references before renting your spare room
It is essential that you can trust the person you choose as a lodger since they will have access to your home where you keep all of your belongings. You also need to assess that you will be able to live together amicably since you will be sharing your bathroom and kitchen with your lodger. Ask for references which can be from a previous landlord if they have had one, their bank or employer. You might also want to consider contacting a credit reference agency to run a credit check on the person.
The usual landlord obligations to repair will not apply when you rent a spare room but your furniture should comply with fire safety regulations and a gas safety check should be conducted every year by a qualified Gas Safe engineer.
When you have found a suitable lodger and reached an agreement on terms and conditions of living in the house and on the amount of rent payable for the room, it isn’t essential to have a written agreement but it does make sense to have one so that the rules you have set cannot be disputed in the future. You can download a sample lodger agreement here.
What to do if you want the lodger to leave
If for some reason, things go wrong and you can’t get along with your lodger you won’t need a court order to make them leave because they are effectively sharing your home. However you will need to give them notice in writing, which would usually be 28 days notice to leave but if they have for example, displayed anti social behaviour it may be more appropriate to make the notice period shorter.
Up to £4,250 of the rental income you receive is tax free under the government’s “rent a room scheme” but when you complete your tax return you will have to declare it.