Avoid the “bedroom tax”: reduce the impact of the under occupancy charge

posted by in Debt news

"Bedroom tax" - can you avoid it?

“Bedroom tax” – can you avoid it?

Upcoming benefits changes will mean that if you’re renting from the council or a housing association, and are deemed to have a spare room, you could be facing a reduction in your housing benefit.

This reduction is known as the under occupancy charge (commonly known as the “bedroom tax”).

Renting out your spare room to a lodger is a way to avoid the charge.

Lodgers – can they really stop housing benefit being reduced?

Yes! If a lodger moves in then the room they stay in will not be classed as an empty room for housing benefit purposes. This means you won’t have a reduction to your housing benefit.

Ask your landlord – get permission first

If you’re renting in the social sector you’ll need to get permission from your landlord before getting a lodger. This shouldn’t cause too many problems, particularly if the lodger is going to help you avoid falling into rent arrears.

Benefits reduction – will I be better off?

You’ll be able to keep whatever you charge your lodger to live with you. However, everything over £20 per week will be classed as income and your benefits will be reduced on a pound for pound basis.

So, if you’re charging a lodger £60 a week you’ll keep the whole £60 but your benefits are likely to be reduced by £40 a week, leaving you £20 better off overall.

Finding a lodger – how to attract people to your spare room

There are a few steps you can take to get a lodger:

  • Tidy up: Try to get your spare room looking its best. Nobody will want to rent out a room that’s full of bits of broken bikes and piles of junk
  • Word of mouth: Tell your friends that you’re looking for a lodger as they might know someone who needs a room
  • Local Adverts: Put up a notice in your local shops, universities or newspapers to let people know you’ve a room available
  • Advertise Online: Gumtree or easyroommate (not what it sounds like!) are good places to try to get a lodger.

Be careful

Maybe this is obvious but it’s important to be very picky about potential lodgers. Make sure they can provide references (both professional and personal) and that they’re able to afford to pay you on time every month.

There’s another angle to consider too. Will you get along? While this is harder to judge, try to spend a bit of time with potential lodgers and see how you find them. If it’s obvious that you won’t get along then it’s better to keep looking rather than getting stuck with a someone you can’t abide!

Universal Credit – how will that affect having a lodger?

Nothing’s ever simple with benefits! It’s important to know that lodgers will be dealt with differently for people being moved over to Universal Credit.

Lodgers will no longer count as occupants of spare rooms, so at that point you’ll potentially be affected by the “bedroom tax”. It’s not all bad news though, as the income received from the lodger won’t be taken into account in the Universal Credit application, so you’ll get to keep all the money.

So it’s a case of swings and roundabouts really. You’ll stand to lose some of the housing element of Universal Credit but you’ll get to keep all of the money from your lodger. Whether your worse of better off will depend on how much your lodger is paying and how much your rent will be reduced (14% for properties with one spare room).

Other ways to avoid the “bedroom tax”

Another way to avoid the “bedroom tax” is to move to a smaller property. If you’d be willing to consider this then get in touch with your landlord and ask them if there’s anything with fewer bedrooms available in your area.

Is there any other help available?

If you’ve been affected by the housing benefit changes then you could apply for a discretionary housing payment. This is a fund of money that is managed by your local council and is awarded to people to help them adjust to the new housing benefit rules.

You have to fill in a special claim form to apply and the council will make the final decision on whether they think you’re entitled to any money.

If you’re worried that benefit changes are going to make it harder for you to manage your money then you should get in touch with us for advice. Our online advice tool, Debt Remedy, can give you a personalised recommendation in under 20 minutes. Alternatively you can call our helpline and speak to a debt advisor.

James Winterbottom has been a debt advisor for six years. Away from work he is an amateur app developer and writes fiction. James is a lifelong supporter of Huddersfield Town football club, which suggests he is either very loyal or very daft. He also likes to talk about himself in the third person in bio pages.

Written by

Tags Debt news
  • CSS1978

    What a very misleading post you really should rethink having this on your website, as it’s a narrow minded view on how taking a lodger in…….it will effect claimants income and come October and there back to square one if not worse off and your advice to DHP is pointless as the government have tightened up the rules to avoid people using it to cover the under occupancy rules……..

    • Hello,

      Thanks for the feedback.

      Taking in a lodger is one of the recommended actions listed on the DWP’s website for people affected by the new rules: http://www.dwp.gov.uk/adviser/updates/size-criteria-social-rented/.

      It’s true to say that the income received from a lodger can impact upon benefits but the first £20 received is disregarded.

      I’m guessing the changes you mention in October is the introduction of Universal Credit (which won’t be fully implemented until 2017). Again the blogpost covers how household with lodgers in will be affected by moving to Universal Credit – they may be subject to bedroom tax but their Universal Credit claim won’t be reduced by the rental income.

      Kind regards


  • Jasmine

    Just a quick question I am nearly 60 my daughter cares for me and works full time by this time will I still need to pay bedroom tax even if daughter is onjsa? Thanks

    • Hi Jasmine,

      If your daughter lives with you and there are two bedrooms then you shouldn’t be affected by the “bedroom tax” (or under occupancy charge as it’s sometimes known). It’s hard to say whether your housing benefit would cover the full rent though without knowing more about your finances. The easiest way to check what you’re entitled to would be to use our online benefits checker, which you can find here: http://www.stepchange.org/Howwecanhelpyou/Benefitscheck.aspx.

      Kind regards