With rising fuel and food costs, and the wage growth slowing, the cost of living has inflated from 1.8% to 2.9%. The last time we saw this rise was in September 2013, and is well above the 2.1% forecast by the Reuters poll of economists. The bigger than expected rise in inflation will fuel people’s fears of a reduction in people’s standards of living, but what can you do to take the strain of tightening your purse strings? One option you have is to rent out your spare room, and with amendments to legislation in 2015 allowing up to £7,500 a year tax-free, it’s an option not to be sniffed at. It also offers a solution to a growing housing shortage.
Before you open your doors though, there are things that you need to do to prepare; here’s a list of things you need to consider before you open your doors:
Prepare the room
With lodger incomes as much as £695 per calendar month in London and £506 in other regions, it is worth your time and money making the space as attractive as possible to appeal to an appropriate lodger. Redecorating does not have to cost the Earth; in fact, painting in neutral tones and replacing the flooring can work wonders. Find quality, but cheap carpets from sellers such as Big Warehouse Sale. You are sure to attract not only a professional lodger, but command a higher rent too for hopefully a long-term basis.
You can make up to £7,500 per annum without paying tax by renting out your furnished room. Do remember though, that if you earn more than this threshold, that you will have to fill out a tax return; if you charge for additional services such as meals, you will also have to include this as income on your tax return. If you currently claim the single-person discount for your council tax, taking in a lodger will affect this status, and you need to inform your local authority; however, if your lodger is a student or is only with you Monday to Friday and pays council tax elsewhere, you can still receive your single person discount.
Whilst you hope that your home share will look after your property as if it were their own, accidents do happen, and insurance companies look for any reason to not make a payout. It is prudent to inform your insurance company that you will have a paying guest in your home. The premium is unlikely to be affected too much, but it is vital to let them know so that they can assess the risk. Remember too that if your lodger has unspent criminal convictions, your insurance company is unlikely to honour any claim.
If you have a mortgage, it is wise to contact your mortgage company to advise them that you are going to be sharing your home. They are unlikely to be unreasonable, but may seek assurances that your lodger will not have any rights if your home is repossessed Your lodger may need to sign a consent form to say that they know the house is mortgaged.