Renting out a room if you have mortgage arrears
Renting out a room can help you pay your mortgage. Make sure you understand responsibilities for resident landlords and how having a lodger affects tax and benefits.
When renting out a room 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
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 have a lodger as long as you live in the property. Check with your lender first.
If you're a leaseholder you might also need permission from the freeholder.
Check your buildings and contents insurance. You might need to inform your insurer if you rent out a room. 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 will not affect your benefit if you're on universal credit.
You can keep the money from a lodger. It does not change your universal credit payment.
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 do not 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 and 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 do not have to pay any income tax on the rent you get from a lodger if all of these apply:
you charge less than £625 a month
you live in the home too
it's a furnished room
You have to pay some tax if your rental income is £7,500 a year or more.
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. For example, if you provide meals or they are at home in the day.
If you live alone, renting out a room could increase your council tax bill. For example, you could lose your single person discount unless you rent a room to a full time student.
Check the local housing allowance (LHA) rates in your area. If your lodger has to claim benefits to help with 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:
get a gas safety check done
check they have the right to rent in the UK
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: 6 December 2023
