If you already have a lodger or are thinking of letting out furnished rooms in your property, you may qualify for up to £4250 per year tax free. This is called 'The Rent-A-room Scheme'
If you rent a room to a lodger in your only or main home, you may qualify for the scheme. The accommodation must be furnished and does not have to include meals. The scheme doesn't apply if you rent out separate converted flats in your home.
You can take advantage of the rent a room scheme, if you rent your accommodation or if you own your own home. You will need to check that renting a room doesn't contravene your rental agreement or mortgage provider's terms and conditions.
Here are some general guidelines about choosing a lodger:
1.Use a credit checking service such as Experian or Exquifax
2.Obtain references for your prospective lodger (bank or building society, employer, previous landlord).
3.Interview prospective tenants - find out about likes and dislikes; how much time they'll spend in the house, are they shift workers? How they spend their evenings; and explain house rules. (smoking, visitors etc)
4.You should inform your insurance company that you are letting a bedroom and check if you need any additional cover.
5.Draw up a written agreement of terms and conditions. You should include: rent amount and payment details; which rooms/facilities the lodger is able to use; any services you will provide; how household bills are apportioned, house rules and notice period. This will help if there are any problems in the future.
6.It is advisable to ask for a deposit of one month's rent in advance. This can be used in the event of any unpaid rent/bills or in case any damage is caused to the property.
7.If you are claiming Single Person Discount on your Council tax, you will need to inform the department of your change in circumstances.
8.You will need to inform the Tax Office if you earn over £4250 per year from your lodger.
For more advice about the tax implications and legal situation of renting out a room in your home go to www.direct.gov.uk,. The websites www.spareroom.co.uk and www.mondaytofriday.com may also be useful.