IF you’re lucky enough to own your own home and have a spare bedroom, you could rent it out and make thousands of pounds.
An increase in mortgage rates has meant people thinking about buying homes are holding off.
Here’s how much you could make by renting out your spare bedroom – and everything you need to know before getting a lodger in.
Can I rent out my spare room?
You can rent out your spare room if you own your house – but you need to let your mortgage lender know.
This is because renting out your spare room could go against your mortgage terms – make sure to check before looking for a lodger.
If you rent your house, make sure you ask for your landlord’s permission.
As it’s their property, they might not agree to you subletting your room out – if you get a lodger in without letting them know you’re in breach of your tenancy agreement and you could be asked to leave.
If you’ve bought your home through the government’s Help to Buy or Shared Ownership scheme, you must ask permission from your mortgage lender or housing association first.
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Again, it might be in breach of your mortgage terms and agreement – some lenders and first-time buyer schemes won’t lend you money if you’re planning on getting a lodger in.
How much could I make renting my spare room?
How much you could get from renting your spare room will vary depending on where you live and what the room is like.
How do I rent out my spare room?
You can use the government’s Rent a Room scheme to get a lodger in and make some extra cash.
The scheme allows you to earn up to £7,500 per year – which is roughly £625 a month – tax-free letting out your room.
However, you have to furnish it yourself, so make sure you factor this cost into your calculations.
If you’re sharing the income with your partner or someone else, the threshold is halved from £7,500 to £3,750 per person.
If your earnings are below £7,500, there’s no need to let HMRC know you’re renting your spare bedroom out,
What happens if I make more than £7,500?
If you exceed the threshold for the Rent a Room scheme, you’ll need to let HMRC know by filling in a Self Assessment tax return.
Be aware that expenses like furnishing, repairing damage and insurance are not taken into account – so you can’t claim money back on this.
If you’ve never filled out a tax return before, you’ll have to register for one on the – you need to do this by October 5 this year otherwise you may be have to pay a penalty charge.
To register for self-assessment, visit the GOV.UK website and complete the identification process.
Here’s a step-by-step guide to filling your tax return out.
What else do I need to know?
Make sure you let your mortgage provider, local council and insurer know you’re renting out your spare room, Ross Counsell from GoodMove previously told The Sun.
“Renting out a room could be in breach of your mortgage terms, and you’ll also need to tell your insurer as a new tenant could affect your cover,” he said.
Your council tax bill could also be affected by having an extra lodger on board if you’re single.
This is because you can get a single person discount on your bill worth 25% – which you’ll lose if another person is living there.
Keep in mind that your tenants have certain rights.
For example, you need to give your tenant proper notice of eviction – usually around a month – and by law your tenant must have access to a bathroom, kitchen and bedroom.
“You should draft a standard tenancy agreement with these terms, as well as when rent is due, the fee, length of contract, if bills are included and a room inventory and have this signed by both you and the tenant,” Ross adds.
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