More people than ever are renting out vacant rooms within properties which they own and reside than ever before. Unlike buying a property as an investment with the intention to rent it out, renting a room within a property that you own and yourself live within involves welcoming a tenant into your own personal space. Whether you would feel comfortable doing that requires careful consideration. As far as the law in the UK stands though, even when renting a room within your own home by doing so you are choosing to become a landlord, specifically, a ‘resident landlord’ which involves taking on certain responsibilities.
Resident Landlord Responsibilities
Under UK law, a ‘resident landlord’ is responsible for maintaining the property to a safe standard and ‘good repair’, which you can learn more about via the Private Renting page of the Gov.UK, and providing a tenant or tenants with notice prior to ending letting.
As a resident landlord you are not required to provide tenants with the same amount of notice as a non-resident landlord. You can learn more about how to manage and end a letting agreement as a resident landlord again by visiting the Gov.UK and their ‘End a Letting’ section of the ‘Rent a Room in Your Home’ information page.
It is also important to know that a lodger or tenant residing within your home does not have the right to challenge the rent amount agreed and cannot break their rent agreement lawfully unless a break clause is affixed to their tenancy agreement.
Informing Your Mortgage Provider and Insurance Company
It is imperative to be aware whether you pay for home insurance as part of your mortgage or separately, that renting out a room within your home may invalidate your current insurance policy or contravene the terms of your mortgage agreement. Hence, before accepting a tenant or lodger into your home it is extremely important to speak with both your mortgage and (if taken out separately) your insurance company.
Further, do not fall into the trap of thinking that if you decide to rent a room within your home on a short term (even on a one night basis) that this will be ‘ok’; in fact, short-term rents are against the conditions and the terms of many combined and separate mortgage and insurance policies. Therefore, if you become a resident landlord without informing your mortgage provider and insurance company, at worst you could have your mortgage and / or insurance revoked.
Benefits, Tax and the Rent a Room Scheme
As well as informing your mortgage and insurance providers if you intend to rent out a room within your home it is equally important and your are further legally obligated to inform HMRC as becoming a resident landlord can affect any benefits you are in recipient of and you may too be required to pay tax on the money you earn by means of rent. Failure to notify HMRC that you are or intend to become a resident landlord can result in an investigation, and at the very least a very hefty tax bill.
It is also worth contacting HMRC and reading the information provided via the Gov.UK website about something called the ‘Rent a Room Scheme’. Resident landlords who opt to partake in the scheme are permitted to ‘earn up to a threshold of £4,250 per year tax-free from letting out furnished accommodation in [their] home’. This amount is halved if you live with a partner, but as of April 6th 2016 rises to £7,500 per year.
If you receive rent above the current or soon to be implemented amount and so are legally required to pay income tax, you can choose to either pay tax on any amount that goes over the threshold amount or to pay income tax on the entire amount which enables resident landlords to then claim tax back on necessary expenses such as cleaning services and furniture items.
Advertising a Room for Rent
If you have decided to become a resident landlord and contacted all the applicable parties, one of the most effective, and too cost effective, means of advertising a room you have for rent within your home is to advertise online via a website such as RoomBuddies.co.uk.
Advertising a room for rent online has numerous benefits. Firstly, online advertising ensures that your advert is seen by the broadest spectrum of potential lodgers or tenants. This means that people who have not yet arrived in the area in which you live can both discover and too respond to your advertisement, increasing your chances of securing a lodger.
Advertising online via a reputable and established ‘room to rent’ website also enables landlords to speak via the internet with potential lodgers, and without the pressure of being ‘put on the spot’ by unexpected phone calls, or worse yet unexpected visitors knocking at the door.
Finally, online advertising is the most popular way by which resident landlords today advertise their vacant rooms. Consequently, searching those in your area who are already advertising rooms before advertising your own can go a long way in helping you to determine how much it is reasonable to expect in terms of weekly, monthly or even annual rent.