What about Tax and Council tax?

You should check however if you are claiming any tax allowances for example for installing energy-efficient items, whether these can be combined with the rent a room scheme allowance. 

This is likely to only affect larger landlords though. Most people renting out a room will just have their tax deducted by their employers under the PAYE scheme.

It is still important though, that you keep proper records showing how much rent you have been paid, and receipts for all money spent. For example decorating, furniture, any cleaning expenses etc.

If your rental income goes above the allowance you will need them so you can offset all relevant expenses.  You need to keep a record of ALL income and expenses relating to the lodger – including all furniture and decorating costs and items purchased for the lodger’s room.

If your financial affairs are likely to be complex, for example, if you have several lodgers, and have done work on the rooms which you think will entitle you to an allowance, it is best to take professional advice from an accountant.

Don’t forget that you will be liable for tax if you are charging more than £625 per month to lodgers and you can be fined if you fail to declare the income and pay the tax.  If you charge more than £625 per month you should save part of your monthly income so you will be in a position to pay any tax due.

Note:  you will find >> more information on the Rent a Room scheme here.

Council Tax

If you live on your own, note that taking in a lodger will affect the amount of Council Tax you pay, if you receive a single occupancy discount.

This is because, if your lodger is living with you as his main home, you may no longer be entitled to this discount.  

For more information speak to someone at the office dealing with Council Tax at your Local Authority, or >> there is a useful online guide here.