Taking in a Lodger — Rules, Tax and Agreements

Renting a spare room to a lodger is one of the simplest ways to earn from property — and the legal position is far more flexible than a normal tenancy, provided you set it up correctly.

Lodger vs tenant

A lodger lives in your home and shares living space with you — a kitchen, bathroom or living room. Legally they are a licensee and an excluded occupier, not a tenant. That means no assured shorthold tenancy, no deposit protection scheme requirement, and no court order needed to end the arrangement — only reasonable notice, usually the length of the payment period. If you do not live in the property, the person is a tenant, not a lodger, and full tenancy law applies.

The Rent a Room Scheme

You can earn up to 7,500 pounds per year tax-free letting furnished accommodation in your own home under the Rent a Room Scheme. Above that threshold you either pay tax on the excess or opt for normal rental income treatment — whichever works out better. Check the current threshold at gov.uk.

Practicalities to check first

If you have a mortgage, check the lender allows lodgers — most do with notification. Tell your home insurer, as a lodger affects cover. If you receive means-tested benefits, lodger income can affect them. Gas safety obligations still apply: an annual certificate is required if there are gas appliances.

The agreement

Even though a lodger arrangement is informal legally, a written agreement prevents almost every common dispute. It should cover the room and the shared areas, the payment and what it includes, the deposit and how it is returned, house rules on guests, smoking and pets, and the notice period both ways. Everyone knowing where they stand from day one is what makes live-in arrangements work.