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Lodging is big business in the UK

11 November 2013MeetMyAgent

A study by Santander Mortgages has determined that approximately 1.7m UK homeowners have a lodger in residence, which yields a total income of over £3.3bn per annum in rental payments.

A third of homeowners who rent out a spare room do so to assist family or friends, whilst 11% rent out purely because they need the income according to the study.

The ‘Rent a Room’ scheme

The government incentifies homeowners to rent a room with the ‘Rent a Room’ scheme, which gives them a tax free income of up to £4,250 per annum. This allowance does not increase if the income is shared between a couple.

To be eligible for the scheme you must be a resident landlord whether or not you own the property, or run a bed and breakfast or guest house. A tax return is not needed if the homeowner’s earnings are below the threshold, but if their earnings exceed then a tax return is required. It is at this point that you can opt in to the scheme and claim your tax free allowance.

Money Spinner?

Spare room rentals cover on average 27% of monthly mortgage payments, making keeping a lodger an increasingly attractive prospect for many homeowners. With demand for rentals and rooms in particular being high, amongst students and professionals, there is a good opportunity for homeowners to bring in a bit of spare income.

Speaking on the study Phil Cliff, Director of Santander Mortgages, said: “The ‘rent-a-room’ trend is clearly on the rise as the squeeze on the cost of living drives homeowners to look for ways to supplement their disposable income and cover their mortgage costs. There is clearly still plenty of scope for this market to expand, as homeowners with unoccupied rooms put their property to work by renting rooms to friends, family or tenants.”