Taking in a lodger if you have mortgage arrears

Renting out a room can help you pay your mortgage. Find out the responsibilities of a resident landlord and how it affects tax and benefits. 

When taking in a lodger could be an option

If you have a spare bedroom, you could think about renting it out to a lodger.

You need to:

  • check if you need permission
  • work out if it will improve your financial situation 
  • understand the responsibilities of a resident landlord

You should think about whether you'll feel comfortable with someone else living in your home, especially if you have children. 

You have to give a reasonable amount of notice if you want a lodger to leave even if there's no written agreement.  

Permission to rent out a room

Most mortgage agreements allow you to take in a lodger as long as you live in the property. Check with your lender first though. 

If you're a leaseholder you might also need permission from the freeholder.

You should also check your buildings and contents insurance. You may need to inform your insurer if you take in a lodger. Your premiums could increase. 

How rent from a lodger can affect benefits 

How benefits are affected depends on which benefits you get. 

Universal credit

Rent from a lodger won't affect your benefit if you're on universal credit.

You can keep the money from a lodger without your monthly universal credit payment going down.

You should still report any change in your income via your universal credit account. 

Other benefits

Rent from a lodger can affect your benefits if you get any of the following:

  • employment and support allowance (ESA) - income related
  • jobseeker's allowance (JSA) - income related
  • income support
  • carer's allowance
  • pension credit

Report any rental income as a change in circumstances.

You can charge a lodger up to £20 a week without your benefits being affected.

Any rent you get above £20 a week counts as income if you don't provide any meals.

If the rent includes at least 1 meal a day, then only 50% of the rent you get above £20 a week is counted as income.

It can still be worth renting out a room even if your benefit goes down. You usually get more income from the rent than you lose in benefits.

Example: You charge your lodger £50 a week including breakfast. The first £20 is ignored. 50% of the remaining rental income (£15) is ignored because you provide meals. You're only treated as earning £15 a week from your lodger. Your benefit is reduced by this amount. Even with the reduction, you're £35 a week better off.    

Paying tax on the rental income

You don't have to pay any income tax on the rent you get from a lodger if all of these apply:

  • you charge £625 per month or less
  • you live in the home too
  • it's a furnished room

You have to pay some tax if you earn more than £7500 a year in rent. 

Find out more about the Rent a Room Scheme on GOV.UK

Deciding how much rent to charge  

Estimate your costs first. 

Having an extra person in your home could increase your household spending, especially if you provide meals or they are at home in the day.

If you live alone, taking in a lodger could increase your council tax bill. You usually lose your single person discount unless your lodger is a full time student.  

You could check the local housing allowance (LHA) rates in your area. If your lodger has to claim universal credit or housing benefit to help pay their rent, they can usually get the shared accommodation rate of LHA. 

Responsibilities of a resident landlord

When you rent out a room in your home you take on certain landlord responsibilities.

Before a lodger moves in, you must: 

It's a good idea to draw up a written agreement with your lodger. This could be for a fixed term such as 6 months or you could just have a rolling agreement. 

Find out more about becoming a resident landlord on GOV.UK


Last updated 06 Nov 2019 | © Shelter

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