Rent a room for tax-free money

Updated 1st July 2024

You possibly can make as much as £7,500 a yr in tax free money should you rent out a spare room. But other than the tax-free money incentive, how else could it profit you?

Let’s examine it in depth:

 

Who Could be Interested?

So who to rent your room out to? Your first port of call in fact needs to be your pals and family. Renting to them could also be more ideal than a stranger, providing you possibly can live with them. But no less than you don’t have to worry about not knowing someone.

But when you will need to rent to someone you don’t know, the placement you reside should offer you idea who could also be concerned with renting your room. Equivalent to:

• Are you shut to a university or college? You may provide accommodation for college students.
• Or do you reside near an airport? Cabin crew are frequent lodgers as they often move away from home to do their dream job and wish somewhere close by to rest their head after they should not travelling.
• In case you live in a city or inside close proximity to coach stations and other good transport links, your property is prone to attract interest from commuters who need a weekday place to remain.
• Do you reside in an area that’s popular with tourists or has a whole lot of people visiting for work or study? You may list it for very short amounts of time on Airbnb or an identical site.
• In case you live somewhere where there are a whole lot of English language colleges, you can rent for a number of weeks at a time to foreign students, as you possibly can see here.

 

Furnishing a Room to Rent

Depending on what your room is currently, or was previously used for, it’s possible you’ll need to take into consideration furnishing it for ‘rent a room’ use and maybe re-decorating.

Which implies you don’t should go overboard, but when the room is neutral in decor and comprises the essential amenities then it’s prone to appeal to a greater amount of potential lodgers.

Low-cost and cheerful furnishing

In case your spare room is currently unsuitable for lodgers to maneuver into, furnishing it will possibly be easy and low-cost. You might even give you the chance to get things at no cost, but be certain they’re in good condition before you purchase them.

Sites like:

• Gumtree
• Snaffleup
• Freecycle
• Freegle
• NextDoor

All these offer free stuff, you only have to give you the chance to choose the items up and take them home.

You’re unlikely to give you the chance to furnish the entire room from such sites, and even should you do, it won’t match. But even should you manage to get a bed, some drawers or a desk, no less than this can help towards the price.

For items that you simply don’t want or can’t get secondhand, you possibly can pick up easy, co-ordinating furniture relatively cheaply from places like Ikea,

• Amazon
• Furniture Outlet Village
• Ebay
• Argos.

Don’t forget that any expense you have got in the case of furnishing the room will eventually get covered by the rent paid by tenants. You can even put a few of it against your income reduce your tax too.

Take into consideration what you’d like should you were renting a room somewhere. Include basics corresponding to:

• Wardrobe
• Chest of drawers
• Bedside cabinet or shelf
• Desk and chair
• Kettle
• Mini fridge

It will help people feel at home and benefit from their space.

Contents Insurance

In case you are providing a ready furnished room, you want the contents protected under the home insurance should anything occur to them through theft or fire, for instance.

• The very first thing it’s essential do to make sure your belongings are covered, is to provide an accurate estimation of what they are literally value. Don’t underestimate the worth of your belongings simply to get a lower premium. In case you do that and make a claim, insurers may only pay out a fraction of what your damaged possessions were actually value. It’s you who’ll lose out on this scenario, so at all times be honest.
• There are methods by which you possibly can lower the price of your premiums, for instance by installing fire alarms. To check policies take a look at this home insurance comparison page.
• The valuation of the contents of the room may include the furniture you have got supplied with the room. Nevertheless it may include the belongings of the tenant. On this case, you will have to attend until you have got a tenant before you possibly can fully estimate the worth of the room’s contents.
• You’ll, nevertheless, give you the chance to consult with your tenant whether or not they would quite add their belongings onto your existing insurance policy or create one in all their very own. If their items are added to yours, don’t forget so as to add the price onto their weekly or monthly rent. This makes sure you don’t should pay for his or her belongings in your premium. It’s often easier for them to make one in all their very own.
• There may be a guide for homeowners on the Association of British Insurers website which outlines what it’s essential include in your estimation. In addition to what most insurers will generally cover.
• Be certain that you update this list yearly when the policy is renewed.

Keep your insurer informed

The second thing it’s essential do is be certain your insurers are aware of your lodger. Having someone live in your own home that you simply didn’t previously know, and your insurers should not aware of, can invalidate your cover.

It is because must you make a claim for theft, your insurers could challenge it with the undeniable fact that you have got a stranger living with you.

Promoting your space

That is fairly easy to do:

• First, should you live near to a university, college, ask should you can put some notices around campus.
• Secondly, use sites like

To advertise at no cost.

• Also, don’t forget your individual social media pages. Facebook Groups are particularly good for this.
• Failing these, you can advertise in your local newspaper or put an ad in your newsagent’s window, although each of those will cost you a small fee.

 

References

Unless you manage to rent your room out to a friend or acquaintance, you’re ultimately inviting a stranger into your private home to live with you. Ask potential tenants for some references before you give them the keys. Ask for no less than two.

These will ideally be previous landlords and workplace references.

Take the time to call them up by phone as an alternative of sending them an email. You’ll give you the chance to get an idea of their authenticity rather a lot easier should you actually hear their voice.

For previous landlords, it’s possible you’ll need to ask among the following questions:

• What was their address? Use this to envision that the reference is definitely who they are saying they’re.
• Did they pay their rent on time?
• Did you receive any complaints from neighbours?
• Were you joyful with the best way they taken care of the home?
• Would you rent to this lodger again?

For workplace references, it’s possible you’ll need to ask among the below questions:

• When did they begin working for you?
• What’s their position?
• What kind of hours do they work?
• Are they full or part time?
• Do they receives a commission on a weekly or monthly basis?

It will be certain that the lodger is telling you the reality and be certain that their rent will likely be paid.

 

Drafting a contract

It’s essential to have a contract in place so that there’s a written agreement between the 2 of you. And you possibly can consult with this within the event that anything goes incorrect.

• You have to to state the rent amount per week or month, when it’s to be paid, whether it’s to be paid in money or by direct debit.
• Which bills are included and the way non-included bills will likely be paid (do they pay 25% of the electricity bill? for instance)
• How much notice either side needs to provide for the lodger to depart. The legal minimum is one pay period or 28 days, whichever is longer.
• It is affordable to ask for a couple of month’s rent upfront. This also can act as a deposit in case of damages. If the lodger decides to maneuver out, and there are not any damages, then the deposit will be given back.
• It’s idea to put down some house rules within the contract. In case you work shifts or have young children, your lodger can’t expect to be up all night watching TV loudly or stumbling in from an evening out.
• As silly because it seems, it’s possible you’ll have the desire to make it clear that you simply expect them to tidy up after themselves, it’s your own home in any case.
• In the event that they have any pets, nevertheless it’s at all times idea to set some rules on this.
• The identical goes for smoking, it’s possible you’ll be joyful for them to smoke, confine it to their room, or go outside.
• If you have got difficulty with them, corresponding to the lodger being constantly late with their rent or they disrespect your private home, you possibly can offer a warning. But when trouble continues, they need to depart.
• It’s going to even be idea to get next of kin details out of your lodger. Just in case.

There’s more info on the rights of each side if you end up renting a room to a lodger on the Gov.uk website here.

You possibly can create your individual lodger agreement, or there are a number of on the Net which you could use. Here is one, for example, that is useful to copy.

 

How Much Can You Make?

Methods to receives a commission

Cons

In case you like your privacy and may’t bear the thought of sharing your bathroom and kitchen with a stranger, then renting out a room might be not for you.

Lodgers do have a right to occupy the opposite rooms in the home and in addition to ask guests over, no less than not without your approval. So should you’re not a people person this is perhaps difficult.

But keep in mind that you can gain a lodger who simply likes to maintain themselves to themselves and spends most of their time of their room. Screen potential lodgers properly and the whole lot needs to be OK.