Boost Income on Universal Credit: Rent a Room Tax-Free (£7,500!)
Struggling to make ends meet while claiming Universal Credit? You're not alone. But there's good news: boost your income by £7,500 tax-free each year - simply rent out a spare room!
On top of being tax-free, it won't even affect your Universal Credit - Rental income from lodgers is not counted as income for Universal Credit!
This is one of the best ways to boost your income if you're on Universal Credit and have a spare room.
Imagine pocketing an extra £625 a month - enough for groceries, bills and treats! The £7,500 tax-free allowance, thanks to the UK's Rent a Room Scheme, makes it possible.
How much rent can you charge?
While the tax-free limit is £7,500, you decide the actual rent based on local rates for all-inclusive rooms. The average is around £614 monthly (£971 in London), according to SpareRoom.
Taking in a lodger is quick, easy, and tax-efficient. But keep in mind:
- Costs: Utility bills might increase. Single person 25% council tax discount no longer applies. Advertising, credit checks, and potential damage are also factors.
- Finding the right fit: Carefully screen potential lodgers. Ask questions, check references, and ensure they're a good match for your home and lifestyle.
- Live-in advantage: Unlike traditional landlords, you choose your lodger and have simplified legal obligations. You're under no obligation to rent your room to anyone. Eviction is also easier for live-in situations.
Social housing tenants! Facing the 'bedroom tax' on Universal Credit? Taking in a lodger won't erase it, but the good news is the extra tax-free income can help offset this and boost your finances!
Weigh the pros and cons carefully - check out our guide below!
Renting a spare room can be mutually beneficial, but consider it thoughtfully. Do your research, make sure it suits your lifestyle and budget, and take informed steps. With responsible lodger-sharing, you can enjoy a financial boost and a positive shared living experience.
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Ready to Be a Live-In Landlord?
Your Guide to Live-In Landlord Life
Pros
+ Earn an extra £7,500 tax free each year
+ If on Universal Credit, the rental income is not treated as your income
+ The extra income helps offset the bedroom tax
+ Have extra company in the house
+ Living with like minded lodgers can boost mental and physical wellbeing
+ Extra pair of hands around house to help with chores
+ You can always end the lodger's agreement if it's not working out (with typically 3 weeks notice)
Cons
- Loss of privacy and personal space
- Potential damage and disruption
- Extra responsibilities
- You could lose your single person council tax discount
Don't forget to....
- Check HMRC rules around tax and eligibility
- If you're currently renting, check your tenancy agreement: Some landlords strictly prohibit subletting. Clarify with your landlord or housing association before proceeding.
- If you're a home owner, call your mortgage provider to make sure you're allowed a lodger (most will allow a lodger under existing terms)
- Call your home insurance company to ensure you're covered
- Write up a lodgers agreement
- Get references from potential lodgers (check out referencing at OpenRent)
- Take a deposit (typically one month's rent) and protect this money (good news is the tenancy deposit scheme (TDS) does not apply to lodger's deposits)
- Check a lodger's immigration status
A must read...
The government has an extensive guide (England version here) that explains rules and responsibilities of being a live-in / resident landlord. This is a must read.
The guide states you need to:
- Ensure your gas appliances are checked annually by a Gas Safe engineer
- Ensure your home electrics and appliances are safe (checked by a qualified electrician every 5 years)
- Ensure furniture meets fire safety requirements
How to find a lodger
- A good starting point is to post an advert on SpareRoom. Its free.
- Alternatively, if you're wanting exposure on multiple sites (including Rightmove and Zoopla), try OpenRent.
Two or more lodgers?
Check
whether you will become an HMO (house in multiple occupation) and if you need to be licenced or not by your local authority. If in doubt, call and
check with them.
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