Renting out a room can open the door to extra cash

Making money from spare space could ease financial problems. But stick to the rules, reports Julian Knight

Money is tight for many of us, but there may well be a solution right under our noses – or should that be roof?

Renting out your spare room can bring in more cash than ever before as new research from easyroommate.co.uk shows that the rental on spare rooms is rising well above inflation. A combination of immigration, Britons moving around for work and a shortage of people willing to open their doors to lodgers has caused average rentals to rise by 4.3 per cent in the past year, the website says.

It's not just the young who are looking to lodge. Increasingly, a growing number of middle-aged and older people are looking for comfortable, clean short-term accommodation away from home. This is partly because they don't want to uproot their families away from friends and local schools but also because, outside London and some prime commuter towns, selling a home at a profit is not an option in a largely moribund property market.

Jenda Martin and husband David from Osterley, west London, are typical of homeowners who are looking to cash in on this trend.

"I lost my job in January 2012, and we knew we had to do something to help make ends meet, so my husband and I agreed to take in a lodger – we had briefly taken one in 2006, which had been a positive experience," Jenda said.

But the couple had a very particular type of lodger in mind – one who would fit in with their way of life: "We wanted a professional person, someone ideally who was a homeowner and would respect our home, but crucially an individual who wouldn't just lock themselves away but interact, take their meals with us and get on."

Jenda and David settled on Katherine, who lives in Bath and works in Heathrow and, importantly, was looking for a Monday-to-Friday let. "The whole thing has worked out perfectly, we have become firm friends with Katherine. She has brought real colour to our lives, earned some extra money and we have weekends to ourselves."

Jenda has now found employment again, and Katherine will soon move on, but the couple and their lodger will stay in touch. "Selecting the right lodger can make this a really positive experience. I used a website called mondaytofriday.com to meet Katherine. Now I have a job in Welwyn Garden City, which can be a three-hour commute, I am actually considering going down the same route myself, staying Monday to Friday near my work."

Renting out a room to a lodger brings with it an all-too-rare tax break. Homeowners letting a room in a property they occupy can earn up to £4,250 a year tax free.

Matt Hutchinson, a director of spareroom.co.uk, explained: "There is no need to fill in a tax return as the exemption is automatic. When we surveyed live-in landlords and asked them why they had taken in lodgers, 67 per cent said their motivation was financial.

"However, 29 per cent also cited social reasons as being important. Not everyone wants to live alone, even if they could afford to (which an increasing number of people can't)."

There have been rumblings that this tax break maybe under threat in the upcoming Budget as the Chancellor scrambles to fill a gaping hole in his finances. However, Judy Niner, the chief executive and founder of mondaytofriday.com, said this would be a foolhardy step.

"Generally, people feel they get so little in the form of tax breaks that take one away like this would be churlish, particularly as taking in a lodger is so often used as a means of helping to make ends meet," she said.

"In addition, it is absolutely crucial for labour-market mobility and preventing congestion on the roads and trains that there is property available for people to rent during the week. Kill the tax break and you will not only hurt individuals but the wider economy."

Homeowners considering taking in a lodger are urged to follow the rules to the letter before letting out a room. Most people have the right to take in a lodger, but inform your mortgage provider first. It is also important to contact your household contents and buildings insurance provider to see whether your policy covers you. Mr Hutchinson warned: "Most don't unless you specifically ask them to."

Research from spareroom.co.uk found that up to one in seven people looking to rent out a room is not properly insured to do so, potentially opening themselves up for catastrophic losses in the case of theft or fire.

Personal safety is obviously a concern for anyone opening up their home to a stranger. Most of the main websites designed to unite landlords and tenants, unlike a standard letting agent, place the responsibility firmly on the two parties to ensure their own safety.

This is reflected in the price of using these sites, which take a far smaller cut than a standard letting agent. Therefore, taking references is important and these should be followed up on with current employers and previous landlords.

Spareroom.co.uk says it has individuals checking adverts on the site to ensure there is nothing untoward going on, but ultimately it is a case of lodger and landlord beware.

Renting out a room is not just for homeowners. Some tenancy agreements allow renters to take in a lodger, although the landlord should be informed beforehand. With the coming of the controversial "bedroom tax" in April, Mr Hutchinson reckons more social tenants will be looking to rent a room: "We should see more social tenants becoming live-in landlords in 2013. The bedroom tax means there will be thousands of people who will lose out financially if they don't either move or take in a lodger. Many are unaware they even can rent out a room but, for most, it's a definite possibility and should be explored."

Such an outcome may increase supply of rooms and in turn place a cap on the rentals which, as the easyroommate.co.uk research shows, have been rising sharply.

Rent-a-room tips

To benefit from the rent-a-room scheme, you must comply with these conditions.

* The room or rooms must be furnished.

* They must be in your family home, where you live most of the time.

* The scheme doesn't apply if you're renting out a self-contained flat or letting office space.

* If you are a tenant in your home, check that your lease permits you to take in a lodger

* If you have been getting a single-person council tax exemption, you must let your council know you are no longer living alone. Unless your lodger is a student, you will lose the discount

* You will need an annual gas safety check. q Furniture and furnishings must meet safety standards.

* If you have more than two lodgers, your home will count as a House with Multiple Occupation (HMO) and you'll have to comply with extra health and safety requirements. You may also lose your tax break as you will be deemed as running a guest house.

Discover more property articles at Homes and Property
News
A Brazilian wandering spider
news

World's most lethal spider found under a bunch of bananas

News
people
Arts and Entertainment
Tim Wonnacott dancing the pasadoble
TVStrictly Come Dancing The Result
Sport
Mario Balotelli pictured in the win over QPR
footballInternet reacts to miss shocker for Liverpool striker
PROMOTED VIDEO
Arts and Entertainment
BBC's Antiques Roadshow uncovers a TIE fighter pilot helmet from the 1977 Star Wars film, valuing it at £50,000
TV

TV presenter Fiona Bruce seemed a bit startled by the find during the filming of Antiques Roadshow

News
people

Comedian says he 'never laughed as hard as I have writing with Rik'

Sport
Steven Caulker of QPR scores an own goal during the Barclays Premier League match between Queens Park Rangers and Liverpool
football
News
i100
Life and Style
tech
Property search
Property search
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Science teacher

£110 - £130 per day: Randstad Education Chelmsford: We are seeking a languages...

Year 6 Teacher

Negotiable: Randstad Education Plymouth: Randstad Education Ltd are seeking KS...

Year 6 Teacher

Negotiable: Randstad Education Plymouth: Randstad Education Ltd are seeking KS...

Year 4 Teacher

Negotiable: Randstad Education Plymouth: Year 4 Primary Teachers needed Randst...

Day In a Page

Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album
Hugh Bonneville & Peter James: 'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'

How We Met: Hugh Bonneville & Peter James

'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'
Bill Granger recipes: Our chef's heavenly crab dishes don't need hours of preparation

Bill Granger's heavenly crab recipes

Scared off by the strain of shelling a crab? Let a fishmonger do the hard work so you can focus on getting the flavours right
Radamel Falcao: How faith and love drive the Colombian to glory

Radamel Falcao: How faith and love drive the Colombian to glory

After a remarkable conversion from reckless defender to prolific striker, Monaco's ace says he wants to make his loan deal at Old Trafford permanent
Terry Venables: Premier League managers must not be allowed to dictate who plays and who does not play for England

Terry Venables column

Premier League managers must not be allowed to dictate who plays and who does not play for England
The Inside Word: Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past

Michael Calvin's Inside Word

Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past