Rent A Room For Regular Income – Take A Lodger

Renting a room is a big decision. Whatever you do rent safely and make you draw up an agreement. They are available online but you'll want to customise it.

If you’ve got a spare room in your home, now could be the time to rent it out and turn your spare space into cash. As the jobs market changes demand for people wanting lodgings is growing especially those who want Monday to Friday rooms. And it’s not just London either. The rental market is booming. But you don’t have to be a landlord to make money from property. If you have a spare room, you can think about taking advantage of the terms offered under the UK’s rent-a-room scheme.

Renting a room is tax-free up to £4,250 – that’s thousands of pounds a year from letting your room, before you have to pay any tax on it. Ignore what you read about demand for rooms being restricted to London. You may only want to rent your room certain times of the year or perhaps renting it Monday to Friday appeals. There’s demand in locations the length and breadth of the UK. Short term lets can command big premiums for festivals and holiday periods.

Essential scheme rules

Under the rent-a-room scheme you must not only be renting a room in your main home but you must also live in the property for at least part of the time. If you only own one property your residence is likely to be your “principal place of residence” (PPR) tax man’s jargon for your main home. But if you own multiple properties you need to check which one is designated your PPR. It’s strange to us that the £4250 threshold has remained unchanged for nearly 20 years, but it can cover charges for meals and cleaning not just the rental itself.

Unlike a conventional tenancy, expenses relating to repairs and insurance can’t be claimed to reduce tax. Theoretically tenants can take advantage of the scheme too but note that 99% of tenancy agreements and leases forbid subletting. Therefore you would need your landlord’s permission in writing. Also note that the room must be furnished and your gas appliances must have a Gas Safety Certificate – known in the trade as a CP12. If you earn more than the £4250 from your lodger you must complete a self assessment tax return to claim the allowance.

What’s the best type of letting for your circumstances?

There are two considerations here. The first one is the location of your property the second is your own preference. Not everyone lives near an airport or a major city but you will be surprised by the numbers of people who live in one party of the country and work in another. Sometimes people take a job but don’t want to move their family or compromise their quality of life.

Here are real life examples. Mark had a low paid programming job in Edinburgh. He quit this to become a contractor – a brave thing to do in a recession. He’s currently working out of Leeds where he lives Monday to Friday but his wife and children continue to live in Edinburgh. Derek and Helen were originally based in Newcastle where Helen has a job with the police. They moved to Scotland for a better quality of life (more outdoor space) but Helen has kept her old job. This works well for them because Helen works shifts and is able to be home for seven days in a row. If you live in a city or location where there are tourists you can let short term to them. This means rooms are priced on a daily rather than weekly rate. Note though that tourists can be very demanding.

We recommend you don’t let to students if you have no previous letting experience.

Pricing And Advertising

Do a thorough check of the prices of rooms in your area. Use specialist sites like SpareRoom and FiveNights and general sites like Gumtree. These are the exact same sites where you can advertise your room for rent.

Maximising your rent

Short term renting – either for key events or like a B&B can work out more profitable than taking long term lodgers. However you may not be comfortable having to deal with lots of changing faces. One thing to think about is the look of your room. If your house has an ensuite then that would be the room to rent as you’ll be able to command a premium rent and both you and your lodger will appreciate the extra privacy. Decorating your room is a good idea. Neutral colours are always sensible. Make sure there is sufficient storage and hanging space. Landlords love Ikea for decorating but you may prefer to style your rental room in the same style as the rest of the house.

Insurance Cover

You need to let your contents insurance company know you will be taking lodgers or paying guests. Your premiums may go up but it’s essential you have the right cover. You should also let your mortgage company know about your plans. It’s also sensible to let your buildings insurance company know. In both cases don’t be surprised if you have to change insurers. You may wish to install smoke alarms if you don’t already have them. A smoke alarm in the rental room although unattractive is worth it for peace of mind, and keeps premiums down.

Rent a room safely

You should vet the background of long term lodgers just like a regular landlord would and it’s always better to draw up a tenancy agreement. Specific agreements apply to rent-a-room lodgers.


Even if you end up renting to someone you know, you are inviting a stranger into your home to live with you. You can use a professional referencing agency rather than trying to reference a lodger yourself. This isn’t free but is worth the expense long term. You may also wish to a Criminal Records Bureau check especially if you have children living in your house.

If you decide to reference a lodger yourself you’ll be looking for proof they paid their rent on time and didn’t damage previous properties. Ask to be shown previous bank statements. Ultimately it’s the only way you can confirm rent was paid on time. Also take a verbal reference from a previous landlord. An employer’s reference is primarily useful to check whether your prospective lodger is in full or part time employment and whether they can afford the advertised rent. Use the information you gather to confirm what your lodger has told you.

Contracts or Agreements

A contract is useful because it puts down in black and white the expectations of both parties. It’s also a record you can refer to if anything goes wrong. Your agreement will include the amount of deposit required (if needed), the amount of rent per week or month, when it is to be paid and how it is to be paid. Many people ask for 2 months in advance which acts as a form of deposit. It must also include how much notice each side needs to give for the lodger to leave. Because the lodger is living in your home it’s a good idea to include ‘house rules’ in the agreement. Most people buy an agreement online and then alter and add to it to meet their requirements. However if you’re unclear about your legal obligations you should speak to a solicitor in case you invalidate the agreement when making changes to it.