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Landlords making extra money from taking in lodgers or renting out a spare room to tourists enjoyed a big boost in last week’s budget. The tax-free “Rent-A-Room” allowance was increased from £4,250 to £7,500 – the first increase since the allowance was introduced 18 years ago.
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Earn Money by Letting Out a Spare Room
Short-term lettings website, www.spareroom.co.uk, has been campaigning for a long time to try and persuade the government to raise the tax-free amount homeowners can earn for renting a room out. Their argument was that the previous threshold was out of date and had failed to keep in line with inflation:
“Renting out a room is the single biggest step struggling homeowners can take to avoid arrears and repossession. Encouraging people to rent out rooms provides a vital source of quality, affordable rental accommodation.”
Taking in a lodger is a simple way of earning extra money without becoming a full-blown landlord. However, as the government points out, it is sensible to take some precautions before you open your home up to strangers. These include:
• Drawing up a proper lodger agreement
• Conducting credit checks and asking for references
• Asking for a deposit (lodger deposits don’t need to be placed in a Deposit Protection Scheme).
License Agreements Vs Tenancies
Homeowners need to be very careful not to cross the line between a lodger licence agreement and a tenancy agreement. The homeowner must share the house with their lodger, not provide separate washing and cooking facilities and have access to the lodger’s bedroom otherwise they are in danger of creating a tenancy.
