renting out a room in a help to buy property

gareth1701

Hi All,

I purchased my 2 bed flat using the Help to Buy Equity Loan scheme. I now want to rent out the second bedroom either Monday - Friday or full time

I understand that im not allowed to lease the whole flat under the agreement but wondered if anyone knew if i was able to find a lodger for a spare room as i remain living int he property full time? At the time of purchase there was no intention to rent, my situation has changed and i now need the additional income to pay off debts.

From research it looks like i can do this with a help to buy ISA but cant find anything relating to the equity loan

I understand if this is the case i can earn up to £7500 income from rent before paying tax which sounds ideal

Advice welcome!

G_M

A lodger should be fine.

Now read:

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

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

See:

LodgerLandlord (21 tips from solicitor Tessa Shepperson + General information site)

Landlordzone (Various articles on taking in lodgers)

Renting out rooms in your home (Government info)

Rent a Room Scheme (HMRC guide for tax-free income from lodgers)

kingstreet

There is nothing here;-

http://www.myfirsthome.org.uk/

so you are probably safe with a lodger.

You should however check your mortgage terms and conditions booklet to see if you have to notify or seek permission from your lender.

G_M

kingstreet wrote: »

You should however check your mortgage terms and conditions booklet to see if you have to notify or seek permission from your lender.

Out of interest, have you ever come across a lender who requires this?

gareth1701

Thanks all, i actually contacted Help To Buy and they said that as long as the agreement wasn't official (through an agency or with any written contract) there wasn't a problem.

My next question is regarding tax. I understand that you can earn £7500 tax free from a lodger pcy. on top of this i live with my partner who contributes to the bills via giving me money direct into my account. My understanding is that this is not taxable as im not making a profit

Anyone know more?

booksurr

gareth1701 wrote: »

My next question is regarding tax. I understand that you can earn £7500 tax free from a lodger pcy.

correct, read the links GM has already given you as all your answers are in them

gareth1701 wrote: »

on top of this i live with my partner who contributes to the bills via giving me money direct into my account. My understanding is that this is not taxable as im not making a profit

it is nothing to do with "profit" it is to do with whether you are living together as a single household - which presumably you are as I take "partner" in the biblical sense. So in that case she is simply contributing to joint household expenses.

Your lodger does not "live" with you, so is not part of your household, so what they pay you is indeed taxable income. What you spend that income on (eg paying bills) is irrelevant for tax purposes if you use the rent a room scheme.

kingstreet

G_M wrote: »

Out of interest, have you ever come across a lender who requires this?

RBS (and probably NatWest) I've actually seen in writing.

kingstreet

Co-op thread from earlier;-

https://forums.moneysavingexpert.com/discussion/3596635

Guest101

gareth1701 wrote: »

Thanks all, i actually contacted Help To Buy and they said that as long as the agreement wasn't official (through an agency or with any written contract) there wasn't a problem.

My next question is regarding tax. I understand that you can earn £7500 tax free from a lodger pcy. on top of this i live with my partner who contributes to the bills via giving me money direct into my account. My understanding is that this is not taxable as im not making a profit

Anyone know more?

I wonder what they constitute as an 'official' agreement?


Perhaps signed in blood?....


Even a verbal contract is official

G_M

gareth1701 wrote: »

Thanks all, i actually contacted Help To Buy and they said that as long as the agreement wasn't official (through an agency or with any written contract) there wasn't a problem.

What an idiotic response. Who are these dorks?

If you use an agency to find your lodger, that lodger is still just a lodger - not a tenant.

And their status as a lodger is just as official whether you advertise yourself, or use an agency.

Similarly a contract exists whether it is written or verbal. Both are 'official' in the sense that I understand it - ie enforcible in law. And that applies equally to a lodger contract or tenancy contract.