Taking in a lodger - is there any limit to the number of rooms?
Are there any other implications?
Taking in a lodger is a great way to provide homeowners with extra income in these times of rising mortgage rates and other costs, and providing the rental income is limited there is no tax to pay on it. However, there are certain important considerations you need to be aware of when taking in lodgers.
There are several pieces of legislation in England and Wales that affect the lodger question. Perhaps the four main ones apply: Health & Safety, HMOs, and the overcrowding and planning rules.
There is no overall national rule limiting the number of lodgers, but the Housing Act 2004 law draws a line between a lodger arrangement and a House in Multiple Occupation (HMO). If you live in the property and rent out one or two rooms to unrelated individuals, you’ll usually remain outside HMO licensing requirements – it means you stay within the “single household with lodger(s)” category.
If there are three or more lodgers who are not part of the same household, your home will almost certainly be classed by your local authority as an HMO. Once you reach five or more unrelated occupiers in total, mandatory HMO licensing applies across England, which means you will probably have to make substantial health & safety adaptations to your property. Some councils also have “additional licensing” schemes covering smaller HMOs, so it’s best to check with your local authority before advertising for lodgers.
For one or two lodgers planning would not normally be an issue. However, with more than two unrelated lodgers (classed as an HMO) some local authorities make Article 4 Directions. These remove “permitted development rights” to switch between a single dwelling (Use Class C3) and a small HMO (Use Class C4), so you would need to apply for planning permission – change of use.
If you need to make extensive alterations to the building, such as adding bathrooms or extending kitchens, you will also need building control approval. It’s always best to check and confirm these things with your local council before making alterations or take on multiple lodgers.
Be warned, there are heavy fines for operating an unregistered and unlicensed HMO.
You have a common law duty to make sure the accommodation you provide for your lodger is safe and fit for human habitation; the basic amenities you would expect for yourself, such as adequate and safe lighting, heating and ventilation, and free access to a bathroom and kitchen.
For licensed HMOs the law sets minimum bedroom sizes which are 6.51m² for one person over 10, 10.22m² for two over 10, and 4.64m² for a child under 10. These are not specified for lodgers, but they act as good benchmarks.
As with private rentals, an annual gas safety check (Gas Safety Regulations) if there is gas in the property, a five-year electrical safety check and working smoke alarms on every floor are required of you as a lodger landlord. If you stray into HMO territory you will need additional fire precautions like fire doors or mains-linked fire alarms.
The legal rights of the occupier depend on whether they are a lodger (licensee) or a tenant. A lodger lives in your property with you and shares the living accommodation, usually sharing cooking and washing facilities. Crucially you retain access to their room for cleaning etc which means you don’t give “exclusive possession.”
This is similar to a hotel situation where guests don’t get tenancy rights, so they can be asked to leave with reasonable notice. A tenant on the other hand has “exclusive possession”. It’s their space and they can exclude everyone else, including their landlord. Of this space you cannot enter without the tenant’s consent, for example in an assured shorthold tenancy (AST) (Soon to be replaced).
The landmark case of Street v Mountford [1985] established this point conclusively; that it’s the reality of the arrangement (the situation), not the label (the heading of the agreement), that matters. So, if for example, the landlord moves out, the lodger could in theory gain tenancy rights as they give them exclusive possession. They then may be a tenant regardless of what the lodger agreement says.
Lodgers can be asked to leave on giving “reasonable notice” (typically the rental period, weekly, monthly rent payment etc); you don’t need a court order, whereas tenants have statutory eviction protections.
1 – You must live in the property yourself.
2 – The tenant must share facilities and not have separate access, such as an annex.
3 – You must retain access rights to the room (e.g. cleaning, inspections).
4 - Use a simple lodger licence agreement – these are inexpensive and available online.
5 - If you want to keep your lodger arrangement happy, avoid disputes by providing good facilities and make sure you spell out your house rules and exactly what is included: bills, cleaning, shared living spaces, plus your reasonable house rules such as noise/music limitations etc.
6 – Inform your insurers and your mortgage lender if you intend to take a lodger. Most times it won’t make any difference.
For this figure you need to do some market research. Search local ads, newspapers and social media and see what others in your area are charging. You may also ask local letting agents as they know the market and may even have lodgers on their books waiting. Recent figures in Q4 2024 were averaging UK rooms up to £774 per calendar month (PCM) while London was down slightly to £993 pcm. (Spare Room)
Finding lodgers is usually straightforward. You can use the methods mentioned above, local ads and agents, but you can also contact schools, colleges, university accommodation officers, hospitals and local employers whose students and staff often want lodgings.
It is wise to take references, do a credit check from one of the credit reference agencies, and as they will be living in your own home, perhaps with your own children, you may want to do a criminal record check.
Income from lodgers is not necessarily tax free and is added to your existing income. You will need to do a self-assessment tax return if your income from property is above a certain amount.
However, HMRC operate what is known as the “Rent-a-Room Scheme”. The Rent-a-Room Scheme is designed to encourage homeowners to let spare rooms offering accommodation to workers and students. You can earn up to £7,500 per year tax-free, though that is halved if you share the income with someone else, for example a spouse or joint owner.
To qualify for the scheme the rooms must be furnished rooms, in your main residence. If your earnings are more, you can either deduct £7,500 from your gross receipts or declare actual expenses.
Like many other UK taxes, the £7,500 threshold hasn’t been increased by HMRC for a good while, since April 2016, whereas rents have increased considerably, which could easily exceed your tax free allowance.
You won’t need to do anything if your rental income is below the allowance, but you should keep detailed records in case HMRC asks. Above that level, make sure you file a tax return – income from property.
Taking a lodger normally doesn’t affect your council tax, though if you previously had a single person discount, you’ll lose it when someone else moves in.
Taking in a lodger can be financially attractive and straightforward for homeowners who understand the rules. For someone living on their own they can become a welcome companion and a friend, so a double bonus.
Make sure you continue to live in the property, keep an oversight but give your lodger space while not handing over exclusive possession. Check with the authorities first and comply with the planning, safety and tax rules. Having a clear agreement – for example does the rent include costs or are these extra - beats a costly court battle every time.
[Main image credit: Kindel Media]
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