In the UK there aren’t many options for some people to fight their way out of debt beyond increasing their income. The logical ways of doing this are to find higher paying employment, take a second job, or work longer hours. However both home owners and tenants have another means of increasing their annual income by up to £4250 tax free, by renting a room in their home.
Taking in a lodger is on the increase as it can benefit both parties. The lodger is not the same as a tenant and the costs of renting a room are less then renting a whole flat or house. The landlord can gain an additional weekly income which may well be convenient, be used to pay down debt, or allow for savings to be established. Anyone can rent a room and increasingly the rent a room scheme is appealing to pensioners who are able to able to benefit from the extra income.
Those who want to participate do not need to fill in a tax return unless the lodger’s rent, including any additional services such as laundry and meals, exceeds £4250. The room must be provided furnished and in order to rent it those who have gas must have the property checked each year and marked as serviced on the Gas Safety Register.
It is advisable to have a tenant referencing service check the person you decide to rent to as they will be living in your home, and such a check can provide greater piece of mind. At the minimum your lodger should be able to provide references which you can check. It is good practice to avoid the embarrassment of rent delays to arrange to have the lodger make rental payments via standing order.
A formal lodger tenancy agreement document is recommended which will outline the living arrangements. It is important to be clear in advance what areas of the home the lodger has access to; what arrangements you wish to come to regarding visitors or overnight guests; the amount of rent to be paid; and whether utility bills need to be contributed to. Obviously you need to know that you can get along with the potential lodger and you should interview them first to make sure that they won’t turn out to be an unwelcome addition to your home.
Lodgers do not have the same rights as tenants so you are at liberty to ask them to leave if the arrangement is not working out, but it is a good idea to work a notice period into the tenancy agreement.
The rent a room scheme provides a viable option for those who are struggling financially to add an extra source of income which could be very welcome. The downside of having a stranger in your home could well be negated by the financial help it will bring in.