Thinking of having Lodgers

NewMember

Hi everyone,

Looking for some advice if possible. I'm looking at buying a house and immediately getting two lodgers in. One would be my partner and one would be a friend. My partner and I would share the same room and my friend would have their own Bedroom, living room and bathroom. My friend would be looking at staying only temporarily, maybe a 2-3 years max. After they move out, I would not get another lodger in to replace them.

I'm wondering, is it worth treating these officially as lodgers, as they will be paying me for living there and contributing to bills? And if so, does that mean I will need to submit my own tax returns in order to qualify for the Rent-a-room scheme? Otherwise, how will the inland venue know the money i'll be receiving is from rent?

Having looked at lodgerlandlord.co.uk which i found elsewhere on these forums, I know there will be additional costs to declaring lodgers, such as higher home insurance, needing a gas certificate, tax on rent over £7500 a year and Capital Gains tax when i sell the house.

What are everyone's thoughts?

hazyjo

Your partner cannot also be your lodger. Lodgers don't share beds

NewMember

In that case, just one lodger then

lisyloo

Think carefully about getting a friend in.
What if they don’t behave as you expect, perhaps are dirtier/messier.
Will you be able to confront your friend as easily as you would a stranger?
Are you the sort of person that would risk the friendship and possibly lose it? Or would you put up and end up unhappy?
Can you mitigate that with “ground rules”?


Definitely everything should be above board and done officially.

Don’t expect anyone to look after the place like it’s their own.

NewMember

Thanks for the reply.

Yes, I would draw up some basic ground rules to try and mitigate any issues and perhaps outline expected behavior, such as limit noise after X o'clock etc.
I have considered the potential issues you have highlighted, and as such, it gave me a very limited pool of friends i'd actually be happy to share with.

So above board, would i need to be doing my own tax returns? If it's a case of my Partner and friend paying directly into my bank account, how does the Tax Man know that £7500 of it is tax free?

lisyloo

You don’t need to do anything if you are within the threshold.
https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme

Keep records, maybe even open a separate account for them to pay into, if that makes things simpler for you. It’s very unlikely you’d be selected for a random HMRC investigation but your circumstances could change (anyone can get ill) where you need to claim benefits and it’ll make your life so much easier if you can account separately for the income.

NewMember

lisyloo wrote: »

You don’t need to do anything if you are within the threshold.

Keep records, maybe even open a separate account for them to pay into, if that makes things simpler for you. It’s very unlikely you’d be selected for a random HMRC investigation but your circumstances could change (anyone can get ill) where you need to claim benefits and it’ll make your life so much easier if you can account separately for the income.

That's a good idea, thank you for the info, much appreciated

NinaSwiss

Assuming that you and your partner are not ready to own together, I'd suggest you don't mix-up your finances in a way that may bite back if you do split up down the line.... e.g. him claiming ownership/interest on your property. Typically your mortgage company will send them something to sign too (if you inform them).

E.g don't have him paying towards your mortgage, fixing faults in the property or paying towards a new kitchen, extension etc etc.
From what I understand, contribution towards bills are acceptable.

Comms69

NewMember wrote: »

Hi everyone,

Looking for some advice if possible. I'm looking at buying a house and immediately getting two lodgers in. One would be my partner and one would be a friend. My partner and I would share the same room and my friend would have their own Bedroom, living room and bathroom. My friend would be looking at staying only temporarily, maybe a 2-3 years max. After they move out, I would not get another lodger in to replace them.

I'm wondering, is it worth treating these officially as lodgers, as they will be paying me for living there and contributing to bills? And if so, does that mean I will need to submit my own tax returns in order to qualify for the Rent-a-room scheme? Otherwise, how will the inland venue know the money i'll be receiving is from rent?

Having looked at lodgerlandlord.co.uk which i found elsewhere on these forums, I know there will be additional costs to declaring lodgers, such as higher home insurance, needing a gas certificate, tax on rent over £7500 a year and Capital Gains tax when i sell the house.

What are everyone's thoughts?

A lodger is not a partner and a partner is not a lodger.


I wont comment on the merits of undeclared tax - other than to say "a woman scorned..."

NinaSwiss

And make sure you have a plan to get out quick if living with a friend does not work out. Eg Any lodger agreement you write-up should have a notice period both parties can live with.

I specify one-month on mine as that gives my lodger a reasonable time to find somewhere else to move into. Also because rent payment is on a monthly basis.

NewMember

NinaSwiss wrote: »

Assuming that you and your partner are not ready to own together, I'd suggest you don't mix-up your finances in a way that may bite back if you do split up down the line.... e.g. him claiming ownership/interest on your property. Typically your mortgage company will send them something to sign too (if you inform them).

E.g don't have him paying towards your mortgage, fixing faults in the property or paying towards a new kitchen, extension etc etc.
From what I understand, contribution towards bills are acceptable.

Thanks Nina,
I was under the impression that unless I directly say or state in writing that their contribution is going to pay part of the mortgage, they cant claim an interest. For example, If i were to state the monthly "rent" would be £300, then that's fine, no claim, as it's not necessarily going towards the mortgage and could just be profit in my pocket. But if i were to say something along the lines of "your part of the mortgage repayment" or something to that affect, then they can claim an interest. Is this incorrect?