Taking in a lodger
If you are intending to take in a lodger, it is a tenancy breach if you do not obtain NCHA’s written permission. Tenants do not have the right to take in a lodger until you have been a tenant of NCHA for a year.
- You need to be cautious about letting strangers into your home
- It is a very good idea to have a written agreement, so that you both know where you stand with deposits, notices required, rent payment methods and dates, and house rules. (Please see this attached template which you can adapt to meet your needs).
- Collect rent by standing order – this saves causing frictions between you and your lodger if rent payments are late
- There has got to be a bit of give and take, because sharing a house can cause friction if both parties are not prepared to respect the other’s space.
Lodgers and Housing Benefit
If you are in receipt of Housing Benefit the income from a lodger will not affect how much Housing Benefit you receive if you charge £20 per week or less.
If you include meals as part of your lodger agreement, then 50% of the rent charged over £20.00 a week can be disregarded for Housing Benefit/Council Tax purposes. This may make it worthwhile to provide meals to reduce the amount of Housing Benefit you may lose. If meals are not included, all of the rent over £20.00 a week will be counted for Housing Benefit/Council Tax purposes.
If you charge a lodger more than £20 per week it will affect your benefits - contact your Income Officer, your local Housing Benefit authority and the Department for Work and Pensions (DWP) for further information.
The maximum amount of Housing Benefit that a lodger can claim is £68.00 per week (the current shared room rate allowance). Lodgers should also note that Housing Benefit will not cover things like meals, utility bills or Council Tax.
If the lodger is a family member then they will NOT be able to claim Housing Benefit for their part of the rent as this could be seen as taking advantage of the benefit rules. They will be treated as non dependants for benefits purposes and may result in a deduction in your own Housing Benefit payments.
Earning Income and Paying Tax
Taking in a lodger is an excellent way of earning extra income, helping to pay your bills if you have large commitments or paying for the new Bedroom tax.
The maximum amount of rent that a tenant can charge a lodger tax-free is £81.73 per week as per HMRC's Rent a Room scheme (or up to £4,250p.a.) in furnished accommodation.
Any lodger income is also disregarded for Tax Credit calculations (up to £4,250 as above). This means that your Child or Working Tax Credits will not be affected if you charge rent of less than £81.73 a week.
If you are in receipt of benefits including Income Support, JSA, or ESA the maximum amount you can charge with out your benefits being affected is £20 per week. If you are taking in a lodger you will need to inform the DWP when the lodge moves in.
Lodgers and Council Tax – who is liable for the Council Tax?
A lodger should not affect your council tax banding. but if you are single you will lose your 25% Single Person Council Tax discount. You should therefore collect a portion of your Council Tax from each lodger. Please note that this cannot be part of the rent that you charge.
If you are single and take on a lodger, you will lose your Single Person Discount for Council Tax.
Other Important Information
- NCHA will not permit tenants to have more than 2 lodgers in their home.
- Lodgers have no right to stay on if you give them notice to leave.
- The room you let must be for the lodger to live in, not to run a business.
- You will need to inform your insurers – They may want to change the cover slightly and your insurance may be invalid if you do not tell them in writing that you have taken in a lodger. It’s also important that you check that your insurance fully covers you for liability claims – With no-win-no-fee litigation now common, a claim against you for an accident could be considerable.
- It’s a good idea to ask the lodger to insure their own possessions because your household insurance is unlikely to cover your lodger’s possessions.
Screening your Lodgers
Tenants considering taking in a lodger need to be very careful about who the person is as they will in effect become part of the family and share the facilities of your house, such as the bathroom, toilet, kitchen and living room with you. Tenants with children will need to think even more carefully about people who will inevitably be in close contact with them. Remember, we all tend to be too trusting of people we don’t know and letting a complete stranger into your home is a risk.
You may want to screen lodgers by having a formal Lodger Application form and taking up the same kinds of references and checks you would do with as a tenant etc. You may choose only to take in a lodger who you already know.
Given the risks these days with fraud, debts, identity theft etc, it is most advisable to verify the identity and background of your lodger very thoroughly unless you know they are genuine or they come recommended from a reliable source.
Lodgers Check List
- Inform NCHA
- Inform your insurance providers and take out the necessary cover
- Inform with DWP and your local authority if you are on means tested benefits – the extra income could affect your benefits
- A Lodger Agreement – something in writing setting out a few ground rules
- You must agree that you have access to the lodger’s room
- Agree house rules – smoking, pets, visitors etc.
- Careful screening/verify including identity checks if the lodger is not well known to you
- Set up a Standing Order for rent payments
- Telling your lodger to insure his/her possessions and that if they have their own TV in their room, it will need a license
- Consider taking one month’s rent in advance on entry and a deposit
- If you are a tax payer inform the Inland Revenue of your extra income in your tax return.
See below for information about what effect taking in a lodger may have on your income.
Scenario 1: Single Person claiming JSA – Under occupying by 1 bedroom.
Income: £71.00/wk Jobseekers Allowance.
Housing Benefit: £68.80/wk (reduced by 14% of full rent as under occupied by 1 room.)
Total Income: £139.80/wk (including Housing Benefit)
If takes lodger charging: £20.00/wk
Income: £71.00 Jobseekers Allowance
Housing Benefit: £80.00/wk (no reduction for under occupancy due to lodger)
Lodger pays: £20.00/wk (up to £20.00/wk is disregarded for Housing Benefit purposes)
Total Income (including Housing Benefit): £171.00/wk
Overall effect: £31.20/wk better off.
Scenario 2: Couple claiming JSA – Under occupying by 2 bedooms.
Income: £111.45/wk Jobseekers Allowance (couple rate)
Housing Benefit: £60.00/wk (reduced by 25% of full rent as under occupied by 2 rooms)
Total Income: £171.45/wk (including Housing Benefit)
If takes lodger charging: £20.00/wk
Income: £111.45/wk Jobseekers Allowance
Housing Benefit: £68.80/wk (only reduced by 14% as under occupied by only 1 room now)
Lodger income: £20.00/wk (up to £20.00/wk disregarded for Housing Benefit Purposes)
Total Income: £200.25/wk
Overall effect: £28.80/wk better off.
If you are considering taking in a lodger, please contact your Estate Officer for further advice.