Landlords are a varied bunch: there are the large-scale professionals for whom property is a full-time job; then there’s the buy-to-let crowd looking to make their savings work a little harder. Right at entry-level there are the rent-a-room landlords.
‘Rent a Room’ is really just government-speak for what used to be called ‘getting a lodger in’ – with a few conditions attached. Not only is it one of the easiest and most informal ways to be a landlord, but it’s also tax-free up to a certain amount, and that threshold went up not long ago.
What is the Rent a Room scheme?
If you rent out part of the home you live in to a tenant, then you are what’s called a resident landlord, and you can probably be part of the Rent a Room scheme. This includes live-in B&B or guesthouse owners, but not someone who’s hacked up their house into self-contained flats.
The scheme means that rent of up to £7,500 a year is tax-free.
Rent a Room applies to furnished accommodation in your own home, and for a maximum of two tenants. Any more than that, and you have probably become a house in multiple occupation (HMO), which could mean extra safety and licensing requirements.
If you’re earning under the threshold then there’s nothing you need to do, but if you go over the magic number then you’ll need to fill out a tax return. Couples will be sad to hear that if you own the property jointly then the tax-free allowance for each person is halved.
The lodger’s rights
Depending on whether or not they share living space with you (including kitchen, bathroom or living room), your tenants’ rights could vary. If they’re sharing communal facilities with you then you only need to give reasonable notice for them to leave, which is normally classed as a rent period. So if they pay weekly, then a week’s notice is reasonable. You don’t have to give written notice, and you’re within your rights to change the locks if they haven’t gone by the time they’re supposed to. Hopefully this will not happen.
For a more independent lodger who doesn’t share the above facilities with you, the law affords a bit more protection. For them to move out you’ll need to give written notice, the notice period is usually longer, and if you have to evict them then you’ll need to go to court.
There’s no need for deposits, but if you do agree to hold one then there’s no requirement for it to be in an official tenancy deposit scheme. Likewise you can have fixed-term or rolling, informal contracts. It’s all pretty flexible.
Obviously you’ll need to look after all repairs and maintenance, including safety considerations like smoke alarms and gas safety. It’ll also be up to you to handle the council tax (though you can ask your tenant to pay you their share), and it’s worth bearing in mind that having a lodger could affect any single person’s discount you might have.
As for bills, it’ll all depend what arrangement you’ve come to with your lodger, but it’s not unreasonable to ask them to pay their way. What is definitely unreasonable (and, in fact, illegal) is to place a deliberate mark-up on their share of the bill.
Your insurance probably won’t cover your lodger’s belongings, but the provider may still want to know if you’re renting out a room.
Being sensible about it
Rules for live-in landlords are fairly relaxed, but that doesn’t mean you shouldn’t be a bit careful. It sounds obvious, but a lodger lives in your own home, so if the relationship breaks down then things are going to be much more awkward than they would be with a standard tenant.
Loose arrangements are a recipe for misunderstandings, and having clear expectations from the outset will hopefully save you a lot of trouble in the long-run. Even if your lodger is a friend, it’s worth doing things by the book. Contracts, agreements, deposits and direct debits for rent payments are all good ideas.