Universal Credit - Lodger

Zas1978

Hi I am enquiring for a good friend of mine, who recently has moved into a private property. She will be staying in an annex as a lodger with a lodgers agreement, but it is still part of the property, and she works part time around 25 HPW. The gentleman who owns the property works professionally full time. My friend is contemplating to claim universal credit ontop of her wages (she has never claimed before) and it seems she may be entitled to something as we used a benefits calculator to check. She is however  concerned that claiming UC may affect the property owners income or tax, but I personally can't see this being an issue as the lodger annual rent is less than £7,500. The rent is a set amount per month and covers everything, council tax, electric, though there is no itemised break down. To sum up, would this cause the home owner a headache with HMRC / Universal Credit, or would it simply be a matter of her providing the 'lodger and rent agreement' to UC and keeping them up to date monthly with the rent payments as regular evidence on her UC online account. Thank-you in advance!

poppy12345

Claiming UC will not affect the landlords tax because that will be her benefits, in her name. The housing element will not cover all of her rent because her rent includes all other bills.

If she's under 35 she will be entitled to the shared rate of local housing allowance (unless she receives PIP daily living or DLA mid/high rate care. . If she's over 35 she will be entitled to the 1 bedroom rate.

She can check the rate here. https://lha-direct.voa.gov.uk/

Zas1978

Thats great help, thank you. The only other thing is, does she and the landlord need to work out a breakdown of the monthly rent in order to show UC exactly how much is rent, council tax etc?

tacpot12

Zas1978 said:

Thats great help, thank you. The only other thing is, does she and the landlord need to work out a breakdown of the monthly rent in order to show UC exactly how much is rent, council tax etc?

Yes, she and the landlord will need to work out a breakdown of the monthly rent to show the DWP, how much is rent, and how much is being paid for the other bills. It would be best to work out a consistent basis for the charges for the bills, e.g. it could be based on the area of the property she is renting vs. the area of the main house. If the arrangement becomes a long term arrangement, the landlord might want to update the split so that the actual use of electricity and water made by the tenant is reflected in the rent. The council tax element should perhaps be set at 25% of the CT bill if the owner is currently receiving the single person's discount. 

I do think that the landlord needs to look more carefully at whether this is going to affect their personal tax situation, as the Rent-a-Room scheme is normally reserved for landlords that are renting out a room in their home, not renting an annex. So the landlord may need to call HMRC up to check this, or some more research may need to be done to see if the Rent-a-Room scheme can be used in this situtation as I'm not sure that it can. 

A lodger's agreement probably isn't the correct form of tenancy agreement that is required, but if your friend is willing to occupy the property on the less favourable terms that a lodger's agreement confers, then I guess she can do so. She might want to get some advice from Shelter as to what issues occupying the property on a lodger's agreement may give her.  (Such as being given very little notice to remove her belongings.)

pmlindyloo

tacpot12 said:

Zas1978 said:

Thats great help, thank you. The only other thing is, does she and the landlord need to work out a breakdown of the monthly rent in order to show UC exactly how much is rent, council tax etc?

Yes, she and the landlord will need to work out a breakdown of the monthly rent to show the DWP, how much is rent, and how much is being paid for the other bills. It would be best to work out a consistent basis for the charges for the bills, e.g. it could be based on the area of the property she is renting vs. the area of the main house. If the arrangement becomes a long term arrangement, the landlord might want to update the split so that the actual use of electricity and water made by the tenant is reflected in the rent. The council tax element should perhaps be set at 25% of the CT bill if the owner is currently receiving the single person's discount. 

I do think that the landlord needs to look more carefully at whether this is going to affect their personal tax situation, as the Rent-a-Room scheme is normally reserved for landlords that are renting out a room in their home, not renting an annex. So the landlord may need to call HMRC up to check this, or some more research may need to be done to see if the Rent-a-Room scheme can be used in this situtation as I'm not sure that it can. 

A lodger's agreement probably isn't the correct form of tenancy agreement that is required, but if your friend is willing to occupy the property on the less favourable terms that a lodger's agreement confers, then I guess she can do so. She might want to get some advice from Shelter as to what issues occupying the property on a lodger's agreement may give her.  (Such as being given very little notice to remove her belongings.)

There's an interesting thread here
Universal Credit for lodgers - LandlordZONE Forums
about your first point which seems to contradict what you are saying.

As regards your comments about the annex situation this might be problematic as regards the status of the OP's friend.  Unfortunately opening this 'can of worms' could cause the landlord a problem as they would not be able to use the Rent-a Room scheme.

Plus, if the annex is completely self contained then it may have its own council tax band and the OP's friend would have liability for the council tax.

A bit of a messy situation.

CIS

Zas1978 said:

Hi I am enquiring for a good friend of mine, who recently has moved into a private property. She will be staying in an annex as a lodger with a lodgers agreement, but it is still part of the property, and she works part time around 25 HPW.

As mentioned above this is likely to be problematic for council tax purposes.

Although it may be a single property for the purposes of Housing Law there's a good chance it is a separate dwelling under either Section 3 or Article 3 for the purposes of council tax.

In this situation the lodger would receive a council tax bill for the 'annexe' and would need to claim council tax reduction.

Zas1978

OK we've read through the comments thoroughly and will report everything to the lodger. Thank you kindly for all the information thus far!