Tax-free cash from lodgers can prove costly to landlords


Taking in a lodger can make or break household finances by providing up to £4,650 a year tax-free in additional income, but letting strangers live in your home can have a downside.

Extra cash is always welcome – but if you must check out your home insurance covers lodgers or risk a expensive surprise later down the line.

Take lodger Daniel Cole, 31, of Boston, Lincolnshire, who stole his landlady’s car with a spare set of keys after she changed the locks on the front door.

He returned to pick up his belongings, but could not get in, so took the car instead, a judge at Lincoln Crown Court was told.

Cole was sentenced to 15 months in jail and banned from driving for two years.

The problem is many home insurance policies do not cover a landlord for loss, theft or damage of personal possessions if a lodger lives at the home.

Nor do many policies cover lodger’s personal possessions if they are lost or damaged.

Many householders do not realise the financial repercussions of taking in a lodger if things go wrong.

The reports of Daniel Cole’s conviction do not mention whether this landlady has home insurance cover for lodgers – but the likelihood is she will not find her insurer sympathetic about her loss as she could have taken steps to make her vehicle more secure by not letting him have access to a spare set of keys.

The warning comes at a good time for householders who are being encouraged to throw open their homes to visitors for the London Olympics 2012. Taking in visitors for the games and the following paralympics is likely to fall under the same tax rules as giving a room to a lodger.

The moral of the story is anyone contemplating taking a lodger should get in touch with their home insurer to make sure giving a stranger somewhere to live does not void their cover.

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