Everything you need to know about taking in a paying lodger

Despite this, the latest data shows that the number of households with a lodger has declined in recent years. The number of those with two or more lodgers is down 33 per cent while homes with just one lodger are also down 20 per cent.

At a time when money is tight, taking in a lodger enables homeowners to supplement their monthly earnings, dipping a toe into the rental sector but without having to adhere to the stricter rules and regulations that come with a buy to let investment, not to mention the budget required for a second property.

The figures suggest it can be a worthwhile endeavour from a financial standpoint, as the average lodger pays £438 per month for a room, equating to an annual rental income of £5,256.

As it stands, this means lodgers generate £57.5 million a year in rental income across England’s rental market alone.

The Government’s Rent-a-Room Scheme allows live-in landlords to earn £7,500 tax-free by letting a spare room in their property if they are providing furnished accommodation either in their main or only home.

There are things to consider before you take the plunge.

While taking in a lodger is a relatively simple process, there are a few things homeowners need to be aware of before taking the plunge.

First, your mortgage provider, local authority and insurance provider need to be informed that a lodger will be moving into the home.

If rental income is going to exceed £7,500 a year, HMRC also needs to be informed.

In terms of insurance, there are no hard and fast rules as to how much lodger insurance will cost, but some providers will cover up to three lodgers for no additional fee.

However, it’s important to get cover that includes liability insurance. This means you are covered should your lodger try to sue you for an injury sustained within the home, via a faulty electrical outlet, for example.

Total Landlord Insurance’s specialist lodger home insurance policies are able to accommodate up to six lodgers, up to three at no extra cost.

A landlord is not responsible for their lodger’s personal belongings, so if the lodger wants to insure their valuables, they need to arrange it for themselves.

Another serious consideration should be personal privacy. While the lodger will have their own room, they will be sharing the communal spaces in the home, including the kitchen, bathroom, and living room.

Eddie Hooker, CEO of the Hamilton Fraser Group, which operates industry schemes such as mydeposits, the Property Redress Scheme and Client Money Protect, as well as Total Landlord Insurance, says:

“With the cost of living crisis continuing to weigh heavy on the nation, a lodger can be a win-win situation. Not only do they bring an additional boost to the household’s monthly income, but lodging can also provide a more affordable path for the lodger, compared to the cost of renting a one bedroom property.”

He adds: “However, it is important to keep everything above board.”