Renting out rooms in your home
If you decide to rent out rooms in your house then there may be a number of considerations that you may wish to bear in mind:
- you may be required to pay income tax on any income deriving from the rent that you receive. If you incur a number of valid expenses, arising from renting out a room, then these may be deducted from your income prior to calculating tax due;
- if you have a mortgage, remember that the agreement may be based on the assumption that you were not using your property as a mechanism for generating income. You may, therefore, need to inform your lender of any changes to your living arrangements that may affect this agreement;
- prior to your tenants moving in, you should agree with them the conditions relating to their tenancy - for example how much rent is to be paid, when, whether or not you require a deposit and how long the rental will be. You may wish to bear in mind that the deposit amount is not part of your income and when your tenant moves out you will have to repay it minus any deductions for breakages etc. So, keeping it somewhere separate may typically make sense;
- if you are renting out a room in your property which is supplied by electricity, gas and water from the main house supply then you can pass on charges to your tenants for their usage of these utilities. You may wish to bear in mind that whether you install prepaid meters or work on an estimated usage for your tenants, you can only charge what you yourself paid for the utility and if you overcharge then you may be required to repay this sum*;
- any owner occupier home buildings and contents insurance that you have may cease to be valid the moment you become a landlord and you may need to read your policy carefully to find out if this is the case. If it is, you may need to take out let property insurance which is specifically designed to cover potential risks involved with having tenants in your property such as third party or public liability.