Rent a room in your home
Rent, bills and tax
Rent
You can charge what you want for rent but should agree the amount with your tenant beforehand. You can also ask for a deposit and you can accept Housing Benefit for rent.
You must provide a rent book for tenants who pay weekly.
Council Tax
You will be responsible for Council Tax and can include part of the cost in the rent you charge. You must tell your council if having a tenant means you’re no longer entitled to a single person discount.
If you’re unsure who should pay Council Tax, check with your local council.
Utility bills
If you pay the utility bills for the entire house, you can include a charge in the rent or install pre-paid meters.
You can only charge the amount you’ve paid for gas and electricity plus VAT or you could face civil proceedings. Read Ofgem’s rules on the resale of gas and electricity for more information.
Income Tax
Income Tax is payable on rental income you receive.
If you’re not in the Rent a Room scheme, you’ll be charged Income Tax on any rental income you get after business letting expenses. Examples of business expenses include:
- insurance
- maintenance
- repairs (but not improvements)
- utility bills
If you’re in the Rent a Room Scheme, you’ll pay Income Tax differently.
Capital Gains Tax
You may have to pay Capital Gains Tax when you sell your home if:
- you let out all or part of it
- you’ve taken in more than 1 tenant or lodger at a time
However, you may be entitled to Private Residence Relief and Letting Relief.
Deposits
Resident landlords are not legally required to protect tenants’ deposit with one of the government-approved schemes.
Your local council may guarantee rent for a potential tenant who can’t afford a deposit.
You may have to pay other taxes if you run a bed and breakfast, or provide meals or cleaning services for guests. Contact HM Revenue and Customs for more information.