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Renting rooms in your home

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Renting your extra room is a great way to make your home work for you. Here’s how to do it and what you need to take into account.

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How to rent out a spare room in your house

Renting out your spare room is a great way to make money from your home. It can help you supplement your main income, cover bills and meet other expenses.

The government is even encouraging more people to do it through the Rent a Room scheme. Through this scheme, you can earn up to £7,500 in tax-free income each year from renting out a furnished spare room (up from £4,250).

If your annual income is less than £7,500 and you don’t need to fill in a tax return, you’re automatically exempt. If you earn more than that, you must let HMRC know.

What should I charge to rent out a spare room?

It’s always a good idea to research and find out what other hosts charge for similar rooms in the same area.

Consider the size of the room, and any amenities (e.g. en-suite bathroom) and also take the location and transport links of your property into account when deciding how much to charge.

Data from one of the UK’s largest home-sharing websites shows that in the second quarter of 2023, the average monthly cost of a room was £704 – 17% higher compared to the same period in 2022.

Renting rooms in your home
Renting out your spare room is a great way to make money from your home. It can help you supplement your main income, cover bills and meet other expenses.

Can I claim for the new “digital tax break”?

Homeowners using Airbnb or similar sites to make money from their properties can benefit from a £1,000 ‘digital tax break’. However, it is not possible to claim both this new relief and the existing Rent a Room relief.

The only way to take advantage of both is if a room is rented out, meeting the requirements of the Rent a Room tax rate, and then the homeowner claims the Property Tax Relief for renting out another part of their home, such as a driveway.

Do I have to pay tax on renting a room in my house UK?

If your income from renting a room is less than £7,500 a year, you won’t need to pay any extra tax.

However, if you’re earning more than £7,500 annually from renting a room, you must complete a tax return (even if you don’t usually). You will then have the option to decide how to calculate and pay the tax required.

How many lodgers can I have in my house UK?

The Housing Act 2004 outlines that a property can only be classified as an HMO if it has three or more lodgers living in it, in addition to the landlord and their family. Schedule 14(6) states that the maximum number of lodgers that can reside in a property before it’s considered an HMO is two.

Therefore, if more than two lodgers live in the property, it will be defined as an HMO.

How do I get started renting a spare room in my house
There are lots of helpful resources available to get you up to speed on topics like the different rights of people who live with a lodger compared to those who rent from a landlord.

How do I get started renting a spare room in my house?

Choose a hosting website and spend some time reading their information and advice. There are lots of helpful resources available to get you up to speed on topics like the different rights of people who live with a lodger compared to those who rent from a landlord.

When you’re ready to advertise, take quality pictures of the room and provide an accurate description. Many hosting websites offer a screening service to check out guests and hosts.

However, you should always interview potential lodgers before they book the room – you’re in charge!

These sites also provide safety tips to protect you when you’re selecting and interviewing lodgers. Try to get references, and don’t hesitate to speak to their previous landlords and employers.

How much rent should I charge for a room UK?

The average room rent in the UK is £626 per month, according to SpareRoom’s data from Q3 2022. When London is excluded, the average room rental cost across the UK is £554 per month.

Northern Ireland is the cheapest region in the UK for room rentals, with an average price of £446 per month. The North East of England takes second place with an average of £452 per month.

Protecting your home

Some hosting sites offer insurance, but it’s important to review and update your home insurance policy to take into account your new short or long-term rental.

Make sure you obtain adequate liability insurance as well. Your own contents insurance doesn’t normally cover the belongings of a guest, so make sure they know this before booking.

How much can I rent a room in UK
Getting a lodger could affect your council tax bill if you currently live alone.

What else do I need to consider?

Getting a lodger could affect your council tax bill if you currently live alone. You could lose your single person’s council tax discount of 25%. It’s also a good idea to check the terms and conditions of any lease, mortgage and insurance contracts you have on your home.

Additionally, some mortgage lenders may have restrictions on taking a lodger. If you’re a tenant and want to rent out a room, you’ll need your landlord’s consent.

We hope this guide serves as a useful starting point.

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