Make money from your home: renting out your spare room
Renting out your spare room is a great way to get your home working for you. Here's how to get started and what you need to watch out for.
Renting out your spare room: How it works
- Quite simply, renting out your spare room means you can make money from your home, letting you supplement your main income, helping you manage bills and meet other expenses
- It’s such a good idea that even the government is encouraging more people to do it. In the 2016 Budget they announced that under their Rent a Room scheme, you will be able to earn up to £7,500 tax free earnings a year (up from £4,250) for renting out a furnished spare room.
- If your annual income is below £7,500 and you don’t currently fill in a tax return, the exemption is automatic. If the amount you earn is above you need to make HMRC aware
Which websites to use
- SpareRoom and Airbnb are two of the biggest websites that homeowners use to rent out their spare rooms, whether it’s for a short or long term let.
- The site MondaytoFriday allows you to rent out a spare bedroom during the working week, leaving it free for you at the weekend.
- These sites make it easy for landlords to find lodgers for their spare room and can help with added reassurance, guidance and services
What should I charge?
- It’s always a good idea to do a bit of research and find out what other hosts nearby are charging for their spare rooms
- Consider the size of the room, any amenities (i.e. en-suite bathroom) and also take the location and transport links of your property into account when deciding how much to charge
- According to SpareRoom, the current UK average for a double room, including some bills, is around £90 per week. In some areas, like London, you can charge far more than this
Can I claim for the new “digital tax break” as well?
- In the 2016 Budget, the Chancellor also announced a £1,000 ‘digital tax break’ for homeowners using Airbnb or similar sites to make money from their homes
- However, you will not be able to claim for both this new £1,000 tax relief and the already existing Rent a Room relief
- The only way to benefit from both would be if a room was rented out which met the requirements of the rent-a-room tax rate and then the homeowner claimed through the property tax relief for renting out another part of their home – such as a driveway
How do I get started?
- First, choose which hosting website you want to use and have a good read of all their advice and guidance. There is a wealth of knowledge in the sites so you can quickly get yourself up to speed. For example, did you know live in lodgers have different rights to those renting a flatshare from a landlord that doesn’t live in the property. You’ll want to read up on landlord and tenant rights before drawing up a contract for you and your lodger
- When you’re ready, these sites make it easy to create an advert. Use high quality photos of the room and write up an accurate description.
- Some sites offer a checking service to initially background-check guests and hosts alike. But you should interview the guests – either over the phone or using Skype – before allowing them to book the room. Remember, you’re in control.
- The sites have lots of advice on keeping safe and steps you can take to protect yourself in the process of selecting and interviewing a potential lodger
- Always try and get references – you may wish to speak to previous landlords and their employers
Protecting your home
- Some hosting sites offer insurance. But you’ll want to review and update your home insurance policy to take account of your new short or long term rental.
- Obtain adequate liability insurance.
- Your own contents insurance doesn’t normally cover the belongings of a guest, so make sure they know this before booking
What else do I need to consider?
- Getting a lodger could effect your council tax bill if you currently live on your own. You could lose your single person’s council tax discount of 25%
- Make sure you check the terms and conditions of any lease, mortgage and insurance contracts you have on your home
- Some mortgage lenders may have restrictions on taking a lodger.
- You don’t have to be a homeowner but you will need your landlord’s consent if you are a tenant and want to rent out a room