Mortgage insurance and lodgers

kinnth

Hi,

I recently purchased my first house!, I have been very happy. I have been living in it for 6 months on my own and my girlfriend comes to stay with me sometimes. Now I have 3 potential bedrooms and I am considering letting either 1 or 2 of them to lodgers. I am most likely going to invite one of my friends to live with me so it wouldn't be a stranger. I have a few questions about the whole process.

1. If I get a lodger, must I inform my mortgage supplier? HSBC?

2. Does my girlfriend coming and staying count as a lodger? I estimate she is there 4 evenings a week?

2. I know that I must get buildings insurance for my mortgage and I currently only have it as covering 1 person living in the house. Must I change my insurance? if at the beginning of my insurance it was correct.

3. Even if they are very good friends of mine and I am flexible with rent and living arrangements should I get a contract? If so where can I get a prewritten good lodger contract?

4. What other key things must I bare in mind with lodgers?

5. I am thinking of having the lodgers pay me cash, is that OK? How am I to declare it if I must declare it?

6. Are there any sort of tax breaks or other legal issues that could either help or hinder me during the process?

I'm new to all of this so any help or even recommended websites for me to read would be good.

HappyMJ

1. no

2. no

2. no

3. no. pay rent or leave is the only requirement.

4. they use things. if it's a friend you'll figure it out

5. yes. self assessment means just that you declare your income and pay tax on it

6. quite good rent a room allowances apply so probably no tax due.

kinnth

Thanks for the quick response. Well it all seems very beneficial. I'll make sure im clear up front about the cost and what i expect from then and them from me. I was very worried about not telling the companies the right thing and then getting in trouble later on down the line.

foreversummer

Might just be worth checking out your home insurance company. Most policies do not cover paying guests I believe.

Foreversummer

kinnth

Yes that was the initial problem I had as in I informed them i was likely to have a lodger and then they said i was uninsurable. I'm a bit confused why if all i want is buildings insurance so in the end i went with solo insurance only. I would find it hard if say my house burnt down whether there was a lodger in the house or not? Basically i think to be fully covered i need to get landlords insurance which seems totally excessive for a single lodger who is a friend.

holly_hobby

You are entitled under the HMRC rent a room scheme, to earn £4250 pa, before being liable to income tax. (anything about this is obv taxed at your highest rate).

Have inc HMRC link for you .. http://www.hmrc.gov.uk/individuals/tmarent-a-room-scheme.shtml

Hope this helps

Holly

kinnth

So say if it £250 a month rent I can all 3000 tax free? How do I do that do I have to get receipts or something from the tennent?

xylophone

http://www.churchill.com/churchillguide/lodger.htm - might be of interest