Last week’s budget contained a number of measures aimed at easing the housing shortage. One of them was an increase in the amount landlords who let out a room in their own home can receive in rent before they start paying tax.
Currently, if you’re a ‘lodger landlord’ and you rent out a room in your home you have to pay tax if your income from this exceeds £4250 a year. From April 2016, this will increase to £7500. This will probably mean that the majority of these landlords will no longer have to pay any tax. So there may be many more tempted to enter the market.
One key thing if you rent out a room is to make sure your insurance is correct. According to a recent article in the Guardian, it’s unlikely that having a lodger would have much of an effect on your premiums, but it could negate your insurance if you haven’t told your insurer and you need to make a claim. So you must do this as soon as you start renting a room out. And you need to make sure your lodger discloses any relevant information, such as criminal convictions.
There are plenty of other things to consider including the implications for your mortgage and council tax, as well as income tax. The article in the Guardian has some very good advice.