How to make money letting out your spare room – Money tip # 157

1 min Read Published: 11 Jan 2012

house to rent If you have a spare room in your house why not let it out and earn yourself  thousands of pounds a year tax free.

Demand for short-term lettings in the UK is likely to peak this summer as the Olympics is coming to London and people will be looking for somewhere to stay at a reasonable cost.

One of the most interesting facts is that under the Government's 'rent a room' scheme  letting income up to £4,250 per year is totally tax free, providing the room offered is furnished.

To help locate a tenant websites such as Airbnb.com  and Windu.com will carry out this task  for a reasonable fee. Rooms are normally let on a nightly basis, but longer lets can be arranged, with rents at about £50 per night for a double room in London. Fees charged to a hosts are around 3% of rental income with a further 12% charged to the tenant.

If you are contemplating letting out a room you will need to check with your insurers that your property and contents cover is adequate. Also, if you currently have a mortgage then you will need to advise your lender to ensure that they are comfortable with the arrangement.

Obviously, letting a complete stranger into your home requires a high degree of trust but if you use a reputable agent that carries out comprehensive checks then it can be a 'nice little earner'.