Did you know that if you have a spare room in the property that you own or rent, you could make up to £4,250 a year tax free from letting it out? Read our guide to the government's Rent-a-Room scheme to learn how you can benefit.
To make it easier to take on tenants, the government's Rent-a-Room scheme offers clear tax advantages. Our guide will show you who qualifies for the scheme, how to get the right tenant and what kind of agreements you should make.
If you share a home with a partner and are both letting furnished accommodation in your joint home, you are each entitled to half the allowance without paying tax, i.e. up to £2,125 each.
The main advantages of the scheme are financial:
The disadvantages of the scheme are also financial:
To work out whether the scheme would suit you, calculate your likely income from letting one or more rooms. Then deduct allowable expenses. These are:
Broadly speaking, if your likely income will be up to £4,250 and your expenses are small, the scheme would probably suit you. If your income will be much above this amount and your expenses are, say, £2,000 or more, you'd probably be better off declaring the income and paying tax.
If you advertise for a tenant, it's worth adding a photograph or even video of the room and the living areas. You'll get far more responses to your advertisement than those with no pictures, and it helps people to know what to expect.
Use your description to attract attention. Here are some plus points:
When you interview prospective tenants, ask them about their daily schedules, to be sure that they match with yours, or at least don't conflict. Make sure that they can afford the rent.
It's important that you and your tenant understand in advance what you expect from each other. And if a tenant requests a written statement of the main terms of the tenancy agreement, then you are legally obliged to provide one.
Clauses in an agreement could include:
There are several things that the law states you have to do, if you have paying tenants in your home. You should make sure:
In addition, keeping the property clean will help to prevent arguments.
If you are (or aim to be) a live-in landlord, make sure you treat tenants with respect and courtesy.
One other tip for maintaining good relations with tenants: make sure there is enough hot water for them to bathe or shower in the mornings before they go to work.
For the majority of live-in landlords, tenants are a welcome source of extra income, they help to prevent crime (an occupied home is safer than an empty one) and they provide company. The more the merrier.
Anyone who owns a property and uses it as their main residence can have a tenant under the Rent-a-Room scheme.