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