Costs of having a loder(s)?

MoMoneyMoProblem

So I am looking at buying a home that has 2 double rooms that I could rent out but I'm not sure on the costs involved in regards to bills etc?

I know I will have to pay full council tax, but in terms of electricity, water and gas?

The house has central heating and is an old style terrace so the ceilings are quite tall.

I am thinking of putting the rooms out at ~300/month will bills included if I went ahead with this purchase!

lee111s

All depends on your location.

You're going to be heating the house whether you're there alone or have lodgers, so gas costs are negligible. Electricity maybe £10-20 per month extra? Council tax is an extra 25% on top of what you'd pay alone.

If you rent both rooms out, £600 is a hell of a lot of money, I doubt having lodgers would cost more than £100 a month as opposed to living on yor own so you're at least £500 to the good.

You will have to declare any income over £4250 though.

TBagpuss

bills will depend a bit on who your lodgers are and how they change how the house is used - for instance, if you have a lodger who works significantly different hours than you do, it could mean having the heating on for longer than you would if you were alone.

If you are on a water meter then more people will mean higher water bills.

You would need to chekc the terms of your insurance policies and see what was and was not covered, and whether you needed / wanted to change the cover at all.

When I had a lodger, I found it did not make a significant difference to my bills, other than the Council Tax. In once case, my lodger mostly telecommuted so was home during the day. We had agreed that she would pay any increase in my gas bill and for any additional cost on my broadband if her use pushed us over my allowances, but in fact never paid anything extra as the extra costs were too small to make it worth while.

If you do decide to get a lodger, work out in advance what the ground rules will be, and agree on what is or isn't included.

(both times I did it, I bought things such as cleaning products, toilet roll etc, but the lodgers were responsible for their own food (although in both cases we would sometimes chose to pool our resources and share meals)

tiggerbodhi

MoMoneyMoProblem wrote: »

So I am looking at buying a home that has 2 double rooms that I could rent out but I'm not sure on the costs involved in regards to bills etc?

I know I will have to pay full council tax, but in terms of electricity, water and gas?

The house has central heating and is an old style terrace so the ceilings are quite tall.

I am thinking of putting the rooms out at ~300/month will bills included if I went ahead with this purchase!

From your description above sounds like you will not be living in the house as well? if this is the case they are not lodgers, but you will be running a HMO instead, whole different bucket of fish

G_M

LODGERS (Licencees/Excluded Occupiers)
A lodger (broadly) lives in the same property with their resident landlord, and shares facilities. Unlike tenants, lodgers have few rights.

The Housing Act 1988 provides definitions of 'Resident Landlord' and 'same property' (S31 & Schedule 1 (10).

There is advice for landlords considering taking in lodgers here:

LodgerLandlord (General information site)

Landlordzone (General advice on taking in lodgers)

Renting out rooms in your home (Government info)

Rent a Room Scheme (Government scheme for tax-free income from lodgers)

21 tips (Tessa Shepperson's Lodger Landlord website)

Jenniefour

Why not take a look at Spareroom and find out what the rent is for comparable rooms in your area. Without knowing where you are and the standard of accommodation and facilities you would have on offer it's hard to know whether £300pm would be a fair rent to charge to a lodger. In the right location (near transport, shops etc) and if the room is very nice you will be able to charge a little more if the demand is high.

I have a lodger, my second, and it's worked out very well with both. Second one has been here over two years now.

Make sure you have a written agreement at the outset - which includes an annual rent review should you get/want very long term lodgers. I've just put up the rent although I didn't put it up last year. Lodger is happy with that as she knows that the increased rent for that room now is still a very good deal since rents have shot up in the last couple of years in London.

You might want to consider trying one lodger first rather than two. See if it works out and you are ok with having someone else around in your own home. It's not for everyone.

arbrighton

YOu also need to consider the impact on your income tax- you will need to do a tax return over a certain amount

Living_proof

I think it's only the first lodger up to £4250 which is tax free but I could be wrong. I think the water bill and council tax will be the only increase.

Jenniefour

arbrighton wrote: »

YOu also need to consider the impact on your income tax- you will need to do a tax return over a certain amount

Correct. And OP would still be quids in. Possibly needing to pay extra income tax is no good reason not to have one or two lodgers. If OP is a 20% tax payer and had two lodgers paying £300 pm each then that's an annual income of £7200. After the £4250 Rent a Room allowance is deducted that leaves £2950 taxable at 20%. So looking at a little less than £600 pa tax. Well worth doing. Still worth doing if income from two lodgers takes OP into a higher tax bracket on part of income.

If OP only had one lodger paying £300 pm then no is tax payable, regardless of OP's tax situation.

booksurr

Jenniefour wrote: »

Correct. And OP would still be quids in. Possibly needing to pay extra income tax is no good reason not to have one or two lodgers. If OP is a 20% tax payer and had two lodgers paying £300 pm each then that's an annual income of £7200. After the £4250 Rent a Room allowance is deducted that leaves £2950 taxable at 20%. So looking at a little less than £600 pa tax. Well worth doing. Still worth doing if income from two lodgers takes OP into a higher tax bracket on part of income.

If OP only had one lodger paying £300 pm then no is tax payable, regardless of OP's tax situation.

agreed

also OP needs to consider that with 2 (or more) lodgers then private residence relief is lost and OP becomes liable to capital gains tax upon sale. OP can however claim letting relief instead, but that is capped at £40,000

Cisco001

By the way, make sure you don't accept couple.
I rang 2-3 insurance company when renewing my home insurance recently, they usually accept 2 no. of lodger max.