How Will Taking in a Lodger Affect My Benefits?

Find Out How Taking in a Lodger Will Affect Your Benefits

Does Lodger Income Affect Benefits?

A lodger is someone who lives with you in your home and shares living space with you. They might have their own room, but they live in your home with your permission.

Taking in a lodger can be a great way of giving your household income a boost if you have a spare room. However, before deciding to invite a lodger into your home, it’s important to consider all the implications this might have, especially if you’re receiving benefits.

Before taking in a lodger, it is important to ask yourself, “How will taking in a lodger affect my benefits?”. Whether you claim Universal Credit, Housing Benefit or Tax Credits, having a lodger could influence how much you get.

In this guide, we’ll help you understand whether a lodger will affect your benefits and whether the pros will outweigh the cons.

Do I Need Permission to Take in a Lodger?

Before you even consider taking in a lodger, you need to know whether you’re allowed to. There are different rules for becoming a resident landlord depending on whether you own or rent the property.

If you’re a tenant:

Depending on the type of tenancy agreement you have, you might have a legal right to take in a lodger.

A tenant’s eligibility to take in a lodger can depend on a number of factors, such as the nature of their tenancy agreement, how many spare rooms they want to rent out and how long they have been living in the property.

Those with a secure, assured, fixed term or starter tenancy agreement should be eligible to have a lodger. Shared owners or leaseholders may be allowed to rent out a spare room if their lease agreement states so.

If you’re a homeowner:

If you own your house and have a mortgage, you might have to get the lender’s permission before renting out part of your home.

Will Having a Lodger Affect My Housing Benefit?

So, now we know who is eligible to have a lodger, let’s answer the question on everyone’s lips: “How will taking in a lodger affect my benefits?”.

Don’t worry – if you take in a lodger, you will be considered as needing a bedroom for the lodger for Housing Benefit purposes. This means your Housing Benefit won’t be reduced because the bedroom is no longer ‘spare’.

However, the rent you receive from the lodger will count as income and so could influence the amount of Housing Benefit you get. The first £20 of weekly income from a lodger is ignored and won’t have any effect on the amount of Housing Benefit you receive. If meals are included, 50% of anything over the £20 is also ignored.

If you rent a room to a family member, the rules differ slightly. The bedroom wouldn’t be considered a spare room, but your Housing Benefit might be reduced because of a ‘non-dependant deduction’. The amount your Housing Benefit is reduced by will depend on your relative’s income. The deduction might not apply if you or your relative claim certain benefits.

Will Having a Lodger Affect My Universal Credit?

Now we know how taking in a lodger could affect your Housing Benefit, but what if you claim Universal Credit?

The good news for people on Universal Credit is that the rent from a lodger is not treated as income. This means that no matter how much you charge a lodger, it won’t affect how much Universal Credit you get.

However, working-age social housing tenants are still subject to the size criteria reduction for the spare bedroom that the lodger rents.

How Will Having a Lodger Affect Other Benefits and Tax Credits?

Any income you get from a lodger could affect your entitlement to other benefits and tax credits.

How taking in a lodger will affect council tax:

Taking in a lodger could also affect how much you pay in council tax. For example, if you live alone and choose to get a lodger for some extra income, you need to bear in mind that you will lose the 25% single person discount on your council tax. There are some exceptions, though, such as if the lodger is a full-time student.

How taking in a lodger will affect income tax:

If you’re a taxpayer, you might be able to get tax-free income by letting out a furnished room in your home.

How taking in a lodger will affect insurance:

Taking in a lodger can have an affect on your home contents insurance. It’s important to tell your home insurance provider that you’re renting out a room in your house. If you don’t, your insurance might not be valid when you come to claim. However, your insurer might need to increase your premium to ensure your belongings are properly covered.

A Legal Checklist for Taking in a Lodger

If you’re thinking of taking in a lodger, there are a number of legal criteria you must meet – whether it’s the condition of your home or the immigration status of your lodger.

Condition of your home:

If you are thinking about taking in a lodger, you’ll need to take some steps to ensure your home is safe first.

Any furniture you provide must comply with fire safety regulations. So, if you have any older furniture, you should check the labels to make sure it’s compliant.

Gas safety regulations also apply – if you take in a lodger, gas appliances must be checked every year by an engineer who is registered with Gas Safe.

You will also need to ensure that the electrical system and any electrical appliances you supply, like kettles, toasters or blenders, are all safe to use.

Check immigration status:

If you’re taking in a lodger, you’ll need to check their immigration status before renting the room to them. In fact, checking that a lodger has a right to rent in the UK is a legal requirement for private landlords.

If you’re a tenant renting out a room to a lodger, it is your responsibility to do the immigration check – even if your landlord knows you’re taking them in. If you take in a lodger without doing an immigration check, you could receive a hefty fine. If you take someone who you know or suspect doesn’t have the right to rent in the UK, you could get a fine or even a prison sentence.

Written agreement:

When taking in a lodger, it is best if both you and your lodger sign an agreement that clearly sets out the rights and responsibilities for each of you.

You may be able to get a licence agreement from a legal stationer by post or online. These generally contain standard clauses which can be adapted to suit your needs.

It’s also a good idea to draw up an inventory of the furniture and fittings provided in the lodger’s room or living space. This can help prevent disputes about any deposit paid when the lodger moves out. It can also be useful to take photos to accompany the inventory to show the conditions at the start of the tenancy compared to the end.

Does Renting a Room Affect My Benefits?

So, how will taking in a lodger affect your benefits?

The answer: it depends. How having a lodger affects your benefits will depend on a number of factors, such as:

– The type of benefit you receive e.g. Housing Benefit, Universal Credit, Council Tax Credits etc.
– How much income you earn from having a lodger
– Whether you lived on your own before taking in a lodger
– Who you’re renting your room to

Before deciding to take in a lodger, it’s essential that you double check how this could impact the amount of benefit you can claim. You’ll need to weigh up whether it’s worth getting the extra income from having a lodger but losing some of your benefit money.