Thinking of having Lodgers

trailingspouse

FreeBear wrote: »

But three or more puts you in HMO territory, and two or more could have capital gains tax implications if/when you sell.

I knew there was a reason why having two wasn't a good idea - my mistake for thinking it was related to Rent-a-Room.

in_my_wellies

My son is just buying a house and may get a lodger. From reading above if he had two lodgers he would be subject to CGT.
What records would he need to keep and who would need to know and when regarding CGT? For example, if he rented two rooms for two years and lived there ten years would he need to know the value of the house at the start, then after 2 year and then 10 years? The value might not go up in the first 2 years and then go up a lot in years 8 - 10. How do they work it out? Or am I overthinking this?

anselld

trailingspouse wrote: »

I knew there was a reason why having two wasn't a good idea - my mistake for thinking it was related to Rent-a-Room.

Two lodgers triggers CGT.
Three lodgers triggers HMO.
The above scenario is only one lodger since the OP and partner are considered as a single household.

anselld

in_my_wellies wrote: »

My son is just buying a house and may get a lodger. From reading above if he had two lodgers he would be subject to CGT.
What records would he need to keep and who would need to know and when regarding CGT? For example, if he rented two rooms for two years and lived there ten years would he need to know the value of the house at the start, then after 2 year and then 10 years? The value might not go up in the first 2 years and then go up a lot in years 8 - 10. How do they work it out? Or am I overthinking this?

Only the purchase and sale value are relevant. The rest is done on duration so he would need to record the duration for which there were two or more lodgers.

Honeylife

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?

Found https://www.spareroom.co.uk/ - scroll down to the bottom of the page - to be the most useful for information when I started under the rent-a-room scheme when the allowance was a lot less than £7500! You can email or call their helpline. Website shows you the rents in your area, the size of the rooms and how others equip their let rooms. Two bits of Advice Spareroom gave me which I still use to this day is; Copy of passport and Next of Kin information sheet. Two bits of Advice my former landlady gave me; a lock on my bedroom door and a fireproof safe for personal papers.

Another site I recommend is http://lodgersite.com/ Mandy gets to grip with the fundamentals on that. Dont agree with everything she writes but still most of it is pretty well researched and uptodate.

I don't know where in the UK you live but it is possible to keep within the tax-free allowance - the exceptions being London and the big cities.

I keep banging on and on about getting a written Licence Agreement. Dont go with the Verbal because we are 'friends'. WH Smith & Ryman have adequate basic printed Licence Agreements appx £9.99

Always take a deposit - its for damages, non-payment of rent or similar.

Include Bills, you do not want to chase your lodger every quarter waving a bill at them.

Of course it will take a year or more to actually know your costs e.g. the utilities, the cleaning materials, the toilet paper. Shop for house stuff separate, bulk buy where you can and do a spreadsheet for the first year it will help you for the following years possible rent increases. Be careful about sharing/being generous with food, people quickly take advantage! Don't forget Council Tax.

Again & again on this forum on Lodger we refer on two things - Friends/partners sleeping over and Lodgers sharing the Living Room when you want it for some private moments. Sort it out from the start, difficult to do so after when the partner is there four nights (and days) or has several friends over hanging out in your living room drinking beer and smoking just when you get home exhausted! Put a TV in your lodgers room with a mini sofa & coffee table can be a solution. Set ground rules before, type them up if you must.

Things will happen that you hadn't thought of or expected. I had no idea a lodger and his girlfriend would cook marathon meals at 1.00am, very noisy. So reluctantly had to say kitchen closed at 11.00pm only light stuff like microwave meals or toast, absolutely no three course meal prep after! Never occurred to me that other people did that.

Living together is the same as ever, compromise, but not being overwhelmed and distressed. Its your house, you make the rules. Some people want a "Friends TV show" besties living together type thing. Thats fine when you have equal tenant rights, Lodgers just don't! If you really [STRIKE]cant stand[/STRIKE] cant live with the lodger, give them notice "sorry this isn't working for me" and try again.

Still wont recommend having a friend as a lodger.

NewMember

Honeylife, this was really helpful, thanks.

ashe

Chiming in to agree friends is a bad idea. I’ve done it three times, once to help pay my first mortgage, once with a lad I used to manage at work which was even more complex and once when friend was going to be homeless if I didn’t help.

All 3 I had known for years and got on immensely with

Friend 1 was for about 3 years. His room was forever untidy, and he had a cat (I had one too so didn’t mind) who shed white fur everywhere. He would promise to tidy, swear he’s going to start vacuuming etc but never did. Was a relief in the end when he eventually moved on.

Friend 2 was a hoarder - he had a 3 bed house before and I assumed he would rid of most his stiff, instead he packed it high. He was only there a year but was a frustrating time. Spent almost all his time in the common area of the small house so whenever girlfriend came over he was in the living room already watching cartoons all the time - I get it, its a shared area... but all the time! Felt like we had to book the living room out when we wanted to watch a movie. Also kept at least one greasy takeaway box in fridge at all times for leftovers and then ordered another so fridge always dirty. Could go on forever about it!

Friend 3 at risk of homelessness betrayed my trust and wound up drinking our wine and spirits and topping them up with water. I only clicked on as noticed a newish bottle had gone down an inch so I marked each bottle with a dot for the level and then confronted him.

With each of them felt like always tip-toeing around each other... wouldn’t recommend it at all. Not friends with any of them now

Soundgirlrocks

NewMember wrote: »

Thanks, so with my Partner sharing my bedroom/house, they would not be classed as a lodger even though they are not on the mortgage and would be paying rent?This is where a beneficial interest could arise, best to get a cohabitation agreement drawn up and signed stating your partner is not building an interest in the property, its will give you some protection although not legally binding a court would consider it. Itsnot too much of an issue if this set up is only for a couple of years, however if it becomes a long-term situation your partners claim becomes stronger( So I would actually just have to declare the one lodger (in this case, my friend) You don't need to declare anything for rent a room schemeand as far as my partner is concerned, I don't need to tell anyone? Is that correct?Correct

OP you need to separate the two in your head - Your partner is moving in with you and contribution to the household costs (how much is between you however keep in mind beneficial interest if you don't want them to have a share in the property and get a cohabitation agreement )

Your lodger is paying you rent to live in your property, as long as it is below the rent a room allowance you don't need to declare it. Get a license to occupy drawn up

NewMember

ashe wrote: »

Chiming in to agree friends is a bad idea. I’ve done it three times, once to help pay my first mortgage, once with a lad I used to manage at work which was even more complex and once when friend was going to be homeless if I didn’t help.

All 3 I had known for years and got on immensely with

Friend 1 was for about 3 years. His room was forever untidy, and he had a cat (I had one too so didn’t mind) who shed white fur everywhere. He would promise to tidy, swear he’s going to start vacuuming etc but never did. Was a relief in the end when he eventually moved on.

Friend 2 was a hoarder - he had a 3 bed house before and I assumed he would rid of most his stiff, instead he packed it high. He was only there a year but was a frustrating time. Spent almost all his time in the common area of the small house so whenever girlfriend came over he was in the living room already watching cartoons all the time - I get it, its a shared area... but all the time! Felt like we had to book the living room out when we wanted to watch a movie. Also kept at least one greasy takeaway box in fridge at all times for leftovers and then ordered another so fridge always dirty. Could go on forever about it!

Friend 3 at risk of homelessness betrayed my trust and wound up drinking our wine and spirits and topping them up with water. I only clicked on as noticed a newish bottle had gone down an inch so I marked each bottle with a dot for the level and then confronted him.

With each of them felt like always tip-toeing around each other... wouldn’t recommend it at all. Not friends with any of them now

Thanks for your input Ashe. Sounds like you've had a bad experience with it!
Definitely reinforces the idea of drawing up some guidelines etc.

FreeBear

NewMember wrote: »

Thanks for your input Ashe. Sounds like you've had a bad experience with it!
Definitely reinforces the idea of drawing up some guidelines etc.

A cautionary tail that might put you off the idea - https://forums.moneysavingexpert.com/discussion/5848168/lodger-wanting-to-cook

That said, the replacement(s) are totally different and a pleasure to have around.