You’re probably wondering what ‘Renting a Room’ has to do with being a money saving tip. My view is that when times are tight and uncertain as they are currently. We all need to consider the different opportunities available to us. Looking at how much we are spending and saving is important. Taking full advantage of our resources in order to make an income from any asset that we own is worthy of consideration. So if you have a bedroom that is empty and not occupied and you are struggling to pay your mortgage or your bills. Then by renting out a bedroom for an income can help relieve your finance and possibly keep you out of debt.
Taking in a lodger is inconvenient but compared with being in debt and possibly losing your home because you cannot pay the mortgage is tragic. There is a tax break for renting a bedroom out to a lodger. This tax-free break means that you can rent a furnished room in your home to a lodger for 81.73 per week or 4,250 per year without paying tax on the income.
There is a special exemption within the tax regulations that allows the first 4,250 earned from renting out a room in your home to be tax-free. If you have an up-market home then you could of course charge more per week or year and you would only be liable to pay tax on any earnings above 4,250 per year. You should take a deposit from your new lodger and a months’ rent upfront and write down your terms and conditions of renting a room out. I would ask a solicitor to draw up my agreement to cover myself and my home and family.
There are websites around that advertise ‘rent a room’ or ‘house shares’ if you are struggling to find a lodger. The best way to find a lodger is to ask people you already know like friends, family, workmates, club members, members of your church congregation, etc. Make sure that you take references and do carry out due diligence on anybody that you are thinking of allowing into your home as a lodger.
There are government websites and the citizens advice service, where you can find out more information about renting a room in your home. Please check each year to see that this special tax exemption has not changed. It’s not the best solution but if it means that you can ride out this eminent recession then it is worth considering. Losing your home is not an option. Most of the people who struggled through the last Recession needed an extra 20 to 40 per week to keep the wolf away from the door. Well here is an 80 a week tax-free income tip to surviving the recession.