How Many Lodgers Can You Legally Have in the UK?

How Many Lodgers Can I Have? A Comprehensive Guide for Homeowners in the UK

Renting out a spare room to a lodger can be a great way to earn extra income. However, there are specific rules and regulations in the UK that govern how many lodgers you can have in your home without needing additional licenses or changing the status of your property. This guide covers everything you need to know about taking in lodgers, from legal limits to tax implications and your rights as a landlord.

What Is a Lodger?

A lodger is someone who rents a room in your home and shares facilities like the kitchen, bathroom, and living areas. As a homeowner, you remain living on the property, which is different from renting out an entire property where you do not live.

How Many Lodgers Can I Have Legally in the UK?

1. Renting Under the 'Rent a Room Scheme'

   • Under the UK government’s Rent a Room Scheme, you can take in up to two lodgers in your home without needing to change your property’s classification.
   • This scheme allows you to earn up to £7,500 per year tax-free from letting out furnished rooms in your home.

2. What Happens if You Take More Than Two Lodgers?

   • If you take in more than two lodgers, your property may be classified as a House in Multiple Occupation (HMO). This can require additional licensing and compliance with stricter health and safety regulations.
   • An HMO license is typically required if:
     • You rent to three or more lodgers who are not part of the same household (e.g., not family members).
     • The lodgers share facilities like a kitchen or bathroom.

3. Local Authority Rules

   • Local councils can set their own rules regarding HMOs, so you may need a license even if you only have two or three lodgers. Always check with your local council to confirm the specific requirements in your area.

Key Considerations for Taking in Lodgers

1. Fire Safety Regulations

   • You must ensure your property complies with fire safety regulations, including smoke alarms and fire escape routes, especially if you have multiple lodgers.

2. Mortgage and Lease Restrictions

   • If you have a mortgage, check with your lender to see if taking in lodgers is allowed. Some mortgage agreements have restrictions on renting out rooms.
   • If your property is leasehold, review your lease agreement for any clauses that may prevent you from taking in lodgers.

3. Impact on Home Insurance

   • Your home insurance policy may need to be updated to cover the additional risks associated with having lodgers. Inform your insurer to avoid invalidating your policy.

4. Council Tax

   • Taking in lodgers may affect your council tax if you currently receive a single-person discount. Adding a lodger could remove your eligibility for the discount.

Financial Benefits of Taking in Lodgers

1. Tax-Free Income with the Rent a Room Scheme

   • You can earn up to £7,500 per year tax-free under the Rent a Room Scheme. If you share the property with a partner, the tax-free limit is split between you, allowing each person to earn up to £3,750 tax-free.
   • If your rental income exceeds this threshold, you will need to declare it on your self-assessment tax return.

2. Reduced Living Costs

   • Renting out a spare room can help offset the cost of your mortgage, utilities, and other household expenses.

3. No Need for an HMO License (Up to Two Lodgers)

   • As long as you have two lodgers or fewer, you typically don’t need an HMO license, saving you the cost and hassle of additional paperwork.

Steps to Legally Take in a Lodger

1. Check Your Property Status

   • Confirm with your local council whether your property would be classified as an HMO if you take in multiple lodgers.

2. Screen Potential Lodgers

   • It’s important to vet your lodgers carefully by conducting background checks and obtaining references to ensure they are reliable tenants.

3. Draft a Lodger Agreement

   • Although it’s not legally required, it’s advisable to have a lodger agreement in place. This sets out the terms of the arrangement, including rent, notice periods, and house rules.

4. Inform Your Mortgage Provider and Insurer

   • Let your mortgage lender and home insurer know that you plan to take in a lodger. This can prevent any issues down the line.

5. Register for the Rent a Room Scheme (Optional)

   • If you want to benefit from the tax-free allowance, you’ll need to opt into the Rent a Room Scheme when filing your self-assessment tax return.

Frequently Asked Questions (FAQs)

1. Can I take in more than two lodgers without an HMO license?
No, if you take in more than two lodgers, your property may be classified as an HMO, which would require you to obtain an HMO license.

2. How much rent can I charge a lodger?
The amount of rent you can charge varies depending on the property’s location, condition, and amenities. Research local rental rates to set a competitive price.

3. Do I need to pay tax if I earn more than £7,500 from lodgers?
Yes, if your rental income exceeds £7,500, you must declare it on your self-assessment tax return and pay tax on the amount above the threshold.

4. Can lodgers claim tenancy rights?
No, lodgers are not tenants and do not have the same rights as tenants. You can ask them to leave with reasonable notice if necessary, typically 28 days.

5. Can I take in a lodger if I’m renting my home?
If you are renting your property, check your tenancy agreement to see if subletting or taking in a lodger is allowed. You may need written permission from your landlord.

Conclusion

Taking in lodgers can be a great way to earn extra income and make use of spare space in your home. However, it’s essential to understand the legal and tax implications, especially if you’re considering taking in more than two lodgers. For expert advice on renting out rooms, property management, and maximizing rental income, contact Fraser Bond today.