ASK THE EXPERT

Q. Times are hard and I’m thinking of taking in a lodger. Can I do this, and what issues do I need to consider?

A. If you’re a mortgage payer, then the first thing you need to do is check whether taking in a lodger is permitted under your lender’s (and insurer’s) terms and conditions. Similarly, if you are renting, then you need to check your lease.

That aside, 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. You don’t even need a formal contract, either – although it’s probably wise to 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.

So far, so good. But, needless to say, the Inland Revenue is very interested in the whole subject of lodgers. Granted, under the Rent a Room Scheme – whether you own your home or not – the Government will generously allow you to earn up to £4,250 a year (around £350 per month) tax free from letting furnished accommodation in your home (not a separate apartment with its own facilities) to a lodger. Up to that amount, you don’t even need to declare it on your tax return – as long as you register for the scheme, that is.

However…as we all know, there’s no such thing as a 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, etc!

Remember too that if you are currently receiving a single person’s discount on your Council Tax, then you will lose that as well.

On balance, therefore, taking in a lodger should bring you in some welcome additional income – but I recommend you do the sums first!