Letting a room in your House
Money coming in is better than money going out. That’s why I’d rather be a landlord than a tenant. However, the problems for landlords can be numerous and painful. You have all sorts of legal obligations. You’ll have to deal with tenants that either pay late or find themselves unable to pay at all. Disputes may have to be settled and the property will likely sustain damage. You either have to be constantly fixing problems or have a letting agent do that for you. If you use a letting agent, they will of course eat into your profits. A lot of people would suggest that being a landlord is too much work for too little reward, and in general, I’m inclined to agree. So what can you do if you’re looking to make some extra cash without being bogged down with all the nonsense of buying to let?
Let out a room in your own home!
It’s easy, it’s profitable and it’s tax-free in the UK under the Rent a Room scheme. If you’re letting a furnished room in your own home, you can make £4,250 a year without paying any income tax. For those of you who hate paperwork, you’re in luck. There are no forms to fill in. You simply let the room and start raking in the tax-free cash. That being said, lodgers have different (pronounced ‘less’) rights than tenants so it’s a smart idea to put an agreement in place. An appropriate document can be downloaded at LimeCastle.
The proof is in the profit
My girlfriend and I do not currently have plans to start a family and, given the size of our home, we decided that it was a good idea to take in a lodger, specifically a close friend of ours. This was almost two years ago, and in that time I’ve made a tidy £7,000 for the privilege of living with a close friend. My lodger gets the benefits of cheap accommodation while being in an environment that I think we all enjoy. We love having you here, unnamed lodger!
So, what’s the catch?
Well, generally it’s quite a sweet deal. There are a few things to keep in mind and this scheme isn’t open to everyone. You either need to own the property or have permission to take on a lodger if you’re renting the property from someone else. If you have a mortgage, the mortgage company should be informed of your plans to take on a lodger. Obviously, you’d be giving up a chunk of your space, privacy and possibly even security. Your energy bills will increase and your home insurance premium will go up too. If you were living on your own before, you will lose you council tax discount. However for me, the advantages far outweigh the disadvantages. As a young person doing everything I can to set up a decent financial future for myself, taking advantage of the Rent a Room scheme is one of the best decisions I’ve ever made.