Universal Credit and Lodger

atlantis187

Asking this on behalf of my cousin

They live in their own house and claim UC the house is quite large and were looking at taking in a lodger and charging them for the room do they need to declare this to UC and will this affect their payments?

8dayweek

No and no - Lodger is not part of their household so doesn’t need to be added to the UC claim and any income derived from a Lodger is wholly disregarded. 

There may be tax implications - but this is separate to UC. 

https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme

atlantis187

Sorry forgot to add is the lodger allowed to claim UC including the housing element to cover some of their rent?

huckster

Yes, if the landlord issues a letter confirming the details of rent arrangement, which must state everything is included e.g. electricity, water. 

At any point, there could be a review of the housing by UC and this could include proof rent being paid. 

atlantis187

If they did a review confirming the rent payments that review would be for the lodger right and not my cousin?

so let me get this right before I go and advise them.

Landlord - 
1, they are allowed to take a lodger
2, the rent income is disregarded and has nothing to do with their UC
3, If they did a review of my cousins UC they can't ask them to provide proof of rent been received from the lodger?

Lodger - 
1, the lodger can stay with them and claim UC to pay for some of the rent?
2, If called for a UC review they could ask him to provide proof of rent payments

huckster

Landlord
2 & 3 in general Correct, but if there was any question about undeclared income showing on Bank statements for example, your Cousin may be asked to provide information about this. If it was payment from lodger from renting room which is normally disregarded, then not an issue for UC.

Lodger
1&2 yes correct.

It cannot be a fake situation, just to obtain money from UC. The lodger cannot be member of same family or someone in a relationship with landlord.  

itsthelittlethings

atlantis187 said:

If they did a review confirming the rent payments that review would be for the lodger right and not my cousin?

so let me get this right before I go and advise them.

Landlord - 
1, they are allowed to take a lodger
2, the rent income is disregarded and has nothing to do with their UC
3, If they did a review of my cousins UC they can't ask them to provide proof of rent been received from the lodger?

Lodger - 
1, the lodger can stay with them and claim UC to pay for some of the rent?
2, If called for a UC review they could ask him to provide proof of rent payments

I think they would be a bit suspicious if rent payments weren’t showing on bank statements ie all rent was being paid in cash.

Grumpy_chap

atlantis187 said:

2, the rent income is disregarded and has nothing to do with their UC

Will the OP have to consider the time when the income from the lodger becomes capital?
I do not know the rules in this regard.  It may not be the same as rent income from a BTL (which is not income but immediately capital).

NedS

Grumpy_chap said:

atlantis187 said:

2, the rent income is disregarded and has nothing to do with their UC

Will the OP have to consider the time when the income from the lodger becomes capital?
I do not know the rules in this regard.  It may not be the same as rent income from a BTL (which is not income but immediately capital).

UC is the same. As it's not specifically included in the list of unearned income, it falls to be capital immediately.

The statement "the rent income is disregarded and has nothing to do with their UC" is not correct on multiple levels as (a) it's not income, (b) it's not disregarded (because it's not income), and (c) it is still relevant to UC and must be declared as capital once capital is over £6k.