I’d love to get some advice if that’s ok. I’m going to be away from home a lot this year, including a solid 4 months when I’m abroad from Aug to December.
I’m deciding whether to get a lodger in vs renting the property out and wanted to ask 2 questions:
- If I rented my entire property out for only 1 year, would that likely be more trouble than it’s worth? Is it normal to come back to damage beyond a lick of paint in that timeframe?
- If I got a lodger instead and maintained the right to go to and fro from the house, is there any issue with me not being in the country for months at a time? Thinking of home insurance or ability to do anything if the lodger steals all my stuff or burns the house down whilst I’m away!!
Appreciate I’d get more money overall from renting the whole property, but this is a general request as someone who has never done either of these things to see whether either are a stupid idea if abroad and have personal belongings in the property! Any advice you might have on whether your experience tells you which is likely more sensible very useful.
I should add… I am currently a student which presumably means that I wouldn’t pay any tax if I went over the annual tax free rental allowance when renting out my property- is that right?
In most cases there isn’t significant damage, however if you are unlucky there could be.
Other issues with renting whole property is your mortgage(assumingyou have one), some providers will insist it is moved to a btl mortgage which can incur significant costs. Also if after 12 months the tenants dont want to leave then it can be very slow to get them out via courts so you could potentially be left without access to your property for a long time. You wouldn’t have these issues with a lodger arrangement which is probably lower risk but restricts potential candidates.
For insurance best to speak to your provider but I would expect you would need specialist cover.
I’m not sure where you get the idea that you wouldn’t be liable to tax if you go over the threshold.
If you let the whole property, you can’t assume that the person will leave when you want to come back. Notice period is currently 6 months and if tenants refuse to leave, it can take 18 months with courts and bailiffs involved. You would have no access to the property during this time and you would have to clear all your personal possessions before its let.
If you take in a lodger you would have to ensure you can’t be challenged on whether you are really a resident landlord. If you are away for months at a time then you’re sailing close to the wind. Its not completely clear cut. If its clear that its still your main place of residence, (your clothes there, GP there, electoral registration there etc) then you may be ok, particularly if you keep popping back for weekends. Whether you get the right person is another matter. Anecdotally, I’m aware of people who have no hope of getting a tenancy who have taken on lodger agreements, which are generally easier to obtain. Insurance could be an issue.
I would suggest that unless income from the property is absolutely critical to your finances, that you leave the place empty as we are in very difficult times for landlords.
I travel a lot and can spend weeks/months away sometimes. I have some BTL’s but with regard to my own property, I like to have someone in the property whilst I’m away so the way I manage it is having a lodger who benefits from the “run of the house” - he has his 3 kids from a previous relationship over every other weekend - but only pays £600 pcm which is under the Rent A Room threshold for tax purposes. He has access to the common areas - bathroom, dining room, kitchen and sole use of two bedrooms - one of which has a double bed in addition to seating/tv etc so essentially he has two bedrooms but one doubles as his own sitting room. I have my own bedroom with en-suite, a small guest room, my own sitting room and share the common areas mentioned above. When I’m away, I lock my three rooms so that there can be no question of anyone accessing those areas or my possessions.
The guy was a (good) tenant of mine in a small studio and when he discussed looking for something bigger to accommodate his kids, I offered this solution since he was having trouble finding somewhere big enough within budget. So, to be fair, I knew him before, got along well with him and had experience of him as a tenant so it was quite low risk. This arrangement has been in place for over a year now and works brilliantly. He helps out too - gardening, minor decorating, moving furniture etc. so an added bonus.
In this day and age - and I’m sure many other landlords have had tenancy applications from recently separated individuals with kids - I think this approach could be really beneficial to all concerned by fulfilling needs on all sides.
On the legal side, my tenant has a (NRLA) lodger’s agreement and yes I declare the income which my accountant tells me falls within the Rent A Room scheme (I think it’s currently £7.5K pa max) so I’m not liable for tax on that income.
A huge thank you to all of you - I really appreciate all the input.
Based on what you’ve shared, I am going to speak to insurers / mortgage providers etc. on the lodger option. If I can structure things in such a way that I have a trusted lodger and I can continue to be seen as a resident then that sounds like the way to go. By keeping a separate room and adding a lock to it, I can ensure that all of my personal possessions are out of the way, but there’s no issue getting rid of them when the time is right.
Just to answer the point on the tax - apologies, I wasn’t very complete in my original message but what I had in mind is that I’m not earning any money as a student, so if I were to get a lodger for £1k/month (numbers made up) then I’m assuming that after the £7.5k annual tax free allowance for renting out a second room, the remaining £5.5k would go against my £12.5k annual personal tax free allowance leaving me with no tax to pay and £7.5k remaining of my tax free allowance. Is that the right understanding?
Thanks again for all your help - really useful.
Yes, I think you’re right about the tax, although if it does go above the £7.5k, you would nevertheless need to complete a tax return at the end of the financial year to account for it, but up to £12.5k there would be nothing to pay.
The lodger option may be worth a go, but just try to make sure you’re not away for very long stretches of time or the lodger may get it into the head that its worth a challenge if you do ever have to give notice and if they won, the consequences could be quite serious.
Got it - thank you David!
I’ll do a few checks first and maybe actually be up front with an expert early on to check that what I’m planning is all above board - don’t think I want to live with the worry that I could get caught out at a later date.
Good idea. I would suggest you make an enquiry with a specialist housing solicitor. Someone like Anthony Gold Solicitors or JMW. You should be able to get a free initial discussion.