Need More Income…Take in a Lodger!

by Mark Johnston

It would seem that since the recession some of the only people that are financial secure are those who already own their own homes. However, incomes are being crushed and the hard pressed home owner needs extra cash.

It seems therefore that currently a combination of winter bills and debt accumulation is causing a more and more people to rent out a spare room.

Since the country went in to financial meltdown, renting out a spare room has become an increasingly popular method for home owners to boost their incomes, particularly as the additional income is not taxed in the majority of cases.

The Santander bank suggests that approximately 1 in 10 home owners now earn extra cash by letting a room to a lodger.

By far the biggest growth in flatshare is people taking in lodgers, over half the listings on spareroo.co.uk are now from home owners looking to rent out a room.

Recent data from another source also shows that the UK’s lodger population has exploded in the past 5 years and 2011 saw a record number of new home owners taking in lodgers. These particular figures are up 14% on 2010’s figures and therefore more than double the figures in 2007.

Matt Hutchinson, a director of spareroom.co.uk, said “millions of people are struggling to pay off loans and credit cards and that’s on top of paying ever increasing living expenses from mortgage to heating bills. Therefore it is not surprising that the lodger population is expanding so rapidly as home owners look for ways to boost their incomes”.

There are many websites on the internet, such as spareroom.co.uk and mondayto Friday.com, that enable home owners to advertise their spare rooms.

These rent-a-room entrepreneurs are raking in a total of £3.9 billion a year. Room rents are averaging at around £400 a month and the government’s rent a room scheme allows home owners to earn up to £4,250 a year, by taking a lodger in to a furnished room, with out incurring tax on the rent.

This extra income can really go far towards paying off the mortgage, decreasing debts and paying standard monthly outgoings.

The governments rent a room scheme is optional and lets home owners earn a certain amount of tax free income from renting furnished accommodation in their only or main home.

A lodger can occupy a single room or an entire floor of the home. A lodger is by definition a person that rents a room in the home but does not have exclusive rights to access any part of the house.

Anyone can take advantage of the rent a room scheme, regardless of whether they are a home owner or are renting their home. Although, if they are renting their home, they should check whether their lease allows them to take in a lodger.

Home owners should also check with their mortgage lender before letting a room as some lenders may impose restrictions.

Renting a room will also have implications on the home owners insurance and so they too should be consulted.



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