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How to Live with a Lodger at Home

The UK is currently facing a cost of living crisis, with energy bills sky rocketing and inflation also increasing sharply, creating a squeeze on household budgets.

One way that a homeowner may consider bringing in some extra income is to rent out a room, annex, driveway or part of their property. Before an advert is placed seeking for lodgers, plenty of thought should be put into the impact of such a decision including; financial considerations and tax implications, the checks that should be undertaken before committing as well as the practical realities of cohabiting with lodgers.

We will be discussing the financial and legal considerations to review before inviting a longer to live with you, as well as some top tips in order to create a balanced household.

Financial considerations

Any additional income from leasing out property will be subject to taxes in the same way as other income steams, and therefore a homeowner should consider the following:

  • Their current tax bands and the financial implication of an additional source of income if this results in pushing into the next tax band.
  • National Insurance contributions may also be applicable.
  • Keeping records of all of the transactions related to the property in order to complete accurate reports.
  • Time considerations to register with HMRC and complete the necessary reporting.
  • A commitment to additional wear and tear of the property.
  • The costs of advertising the letting, undertake necessary checks on potential tenants and professional cleaning costs.
  • The costs of additional bills such as an increase in water and electric will need to be considered. We will discuss this further later on.

The likely process of reporting the additional income would be to complete a self-assessment tax return to HMRC reporting the additional income earned along with any allowable expenses.

Any tax due on the rental income will be calculated by deducting any allowable expenses and personal allowances and then by applying tax bands.

The actual level of tax payable will depend on a number of personal circumstances of the individual including any other income, any prior business losses and the total allowable deductions and allowances.

Individuals are entitled to £1,000 tax-free property allowance, therefore if the rental income received within the tax year is less than £1,000, it is often not reportable to HMRC, however sometimes an individual may choose to make a voluntary return should certain benefits be claimed.

Legal Considerations

In addition to the financial considerations mentioned above, there are a range of legal considerations that should be investigated before committing to hosting a lodger including:

Checking the Mortgage terms and conditions

As Mortgageable.co.uk explains “mortgage lenders set their terms in which they lend the money for the property.  It is a common term that lenders do not allow sub-leases of a property, even in it’s just a proportion of the property, therefore it is worth checking with the lender before an advert is drafted for a tenant.”

Checking insurance terms and conditions

Another check to undertake would be to refer to the home insurance terms and conditions as sometimes there are exemptions for sharing access with others. 

Adhere to legal checks

Right to Rent checks that must be undertaken before setting up a new tenancy agreement, ensuring that the potential tenant has the legal right to live within the UK. 

Comply with Tenant Fees Act and Tenancy Deposit Protection

All landlords must adhere to the legislation that came into force in June 2019 preventing the administrative costs of a new tenant moving into a property from being passed on to the tenant themselves, as well as capping tenancy deposits.

Protect Tenants’ Rights

Before deciding to rent out property it is highly recommended that significant research is undertaken into the rights of tenants that must be protected as there are significant consequences for breaching the legal responsibilities including fines or even personal prosecution.


A let property will require annual health and safety testing to be completed on gas fuelled devices and portable electrical items. In addition, a 5 year fixed electrical test would need to be conducted.

Tips for Cohabiting

Now that we have covered the financial and legal matters that must be considered before leasing out property, we can move on to discussing some tips of how to successfully cohabit with lodgers.

Split chores

It would be helpful to set any expectations of splitting chores ahead of the tenant moving in, in order to prevent any arguments later on within the tenancy.

People tend to have different preferences when it comes to chores and therefore discussing how to divide up household chores can work in both parties favours.

Setting boundaries

Boundaries should be set ahead of the tenant moving in confirming what the landlord is and is not comfortable with including (but not limited to); guests, access and smoking for example.

Ad-hoc situations may occur later on which will need negotiating however keeping open communication will help throughout the tenancy.

In addition, house rules or targets may be considered in order to keep household bills down for example turning off electrical items and lights.  One idea to keep electrical usage visible is by installing a smart meter.

Splitting monthly bills

Ahead of advertising for tenants, thought should be given to the household bills and how to split them, for example adding a proportion to the monthly rent to cover bills or advertising that bill are in addition to the rent.  Either way, clarity is very important in order to avoid disputes and negative feelings during the term of their lease, however if choosing to add a set amount included within the rent, consider what would happen should bills rise sharply.

In addition, it is worth discussing and documenting who is responsible for the administration of the bills including selecting suppliers, setting up direct debits or other payment methods, shopping around and moving when suitable.

Set decoration exceptions

In advance of a tenant moving it, decide upon the levels of artist licence in relation to decoration that you are comfortable with, for example should the décor be kept neutral or is the tenant allowed to relocate their spaces as they wish.  There is always the option of decorating shared spaces together to involve the tenant in the decisions and to make them feel like home. 

Document and keep records

Ensure that a formal lease document is drafted, documenting expectations including the date rent is due, the process should rental payments be late or any other consequences of breaking the terms and conditions.  With the processes set before a tenant moves in, everyone should be clear of expectations and the consequences should things not run smoothly, therefore there is less chances of a dispute.

Have an inventory created

Whether or not the spaces are rented furnished or unfurnished, an inventory drafted of the condition of the spaces and any furniture included before the tenant moves in protects both the tenant and landlord.  Photos can be used in order to accurately document the condition of spaces and furniture, along with dates and descriptions.  

Communicate Effectively

Confident and clear communication throughout can really help with effectively working through any issues that arrive during cohabiting. 


We have covered a range of considerations that need to be factored in before and during any shared property lease, including financial, legal and practical factors.

In addition we have covered some top tips in order to build, protect and maintain relationships during a lease, including the importance of written agreements and open communication.