Beat the Bedroom Tax - Take a Lodger
On 6th April 2013 several changes to the UK’s Benefits system came into force – most notably the heavily-publicised ‘Bedroom Tax'. For the uninitiated, the bedroom tax (or the Underoccupancy Penalty to give it its official title) effectively cuts social housing benefit for any claimants with a spare room.
The new legislation has caused quite a stir and unsurprisingly, given rise to all manner of suggestions on how to avoid it. One of the most popular suggestions is to take a lodger.
Taking in a lodger, to state the obvious, means your spare room is no longer spare. You’ll therefore sidestep the tax and lose none of your housing benefit in underoccupany charges.
Be warned - the rent you receive from your lodger is classed as income, so your benefits may be reduced accordingly - but a quick maths equation shows in most cases you would still be better off over all.
If, after investigating your options, you do take a lodger on board – or indeed if you already have one, there’s one more cost you need to factor in to your calculations - Insurance.
Renting out your spare room could very well invalidate your home insurance, or at the very least push up premiums – meaning a switch to Landlord Insurance might be required.
That’s because when you take a lodger on board, you effectively become a landlord, and only the special terms found in a dedicated landlord insurance policy will provide adequate cover.
Landlord insurance is of course more commonly associated with the Buy-to-Let market, but applies equally when you’re renting out a room in your own home.
Now of course, paying a higher insurance premium could negate the benefits of taking a lodger at all.
But get a cheap landlord insurance quote from QuoteRack, and you should still end up better off – all while ensuring you’re fully covered for any mishaps at home.