Today I’m highlighting quite a traditional way of making extra money, but none the worse for that.

If you have a spare room (or rooms) in your home that you don’t mind letting out, you can generate a steady income by doing so. 

Even better, you can earn up to £7,500 a year (gross) tax-free under the government’s long-running Rent a Room Scheme. 

The Rent a Room Scheme

Anyone with space in their own home is allowed to use this scheme. You can let a single room or an entire floor.

You don’t even have to be the home-owner yourself. If you’re a tenant, you can sub-let a room, as long as your lease allows you to do this.

There are some restrictions, though. Most importantly, the accommodation must be furnished and it must be within your main residence. And you can’t claim under the scheme for self-contained flats even if they are in your own home.

• In addition, if you have a mortgage you will need permission from your mortgage provider. You should also request permission from your home insurance provider.

Money matters

If your gross rental income is under the £7,500 annual limit you don’t have to take any other action and can keep all the money tax-free. 

You don’t even have to tell the taxman unless you fill in a self-assessment form already (in that case you’ll need to enter the rental income on your return but won’t have to pay any tax on it).

One important thing to note is that the £7,500 a year tax-free allowance is for total rental income. You aren’t allowed to deduct any expenses from this, e.g. repairs or redecoration.

If you earn over £7,500 a year from renting you have two choices. One is that you can keep the first £7,500 tax tree under the Rent a Room scheme and pay tax at your highest marginal rate on the balance above this (that’s 20% for basic rate taxpayers, 40% for higher rate and 45% for additional rate – different rates apply in Scotland). This will probably be the best option for most people.

Alternatively, you can opt out of the scheme altogether. In that case you will be treated like any other small business. You will be taxed on your entire rental income, but allowed to deduct all reasonable expenses before tax is charged on what is left. This will be advantageous if you have major property-related expenses to cover. 

You can choose which option will be best for you each year, so it’s important to keep detailed financial records. More information can be found on the official government website.

Short term letting

If you don’t want a permanent – or semi-permanent – lodger, another option that has become hugely popular in recent years is short-term letting to budget travellers and people who prefer a more personal alternative to hotels.

At the forefront of this trend has been Airbnb. This site lets you offer anything from a sofa in your living room to your whole house. You can set your own rent, and decide which would-be guests you want to accept.

In most cases Airbnb charges you 3% of whatever you charge your guests (they also charge guests a service fee of around 14%). You get paid via Airbnb approximately 24 hours after your guest checks in. You can see more details about Airbnb fees and charges here.

Income from Airbnb rentals can also be claimed under the Rent a Room scheme, so long as you meet the general requirements mentioned above. This applies even if you rent out your whole house for a short period, as long as it clearly remains your main residence.

Short-term letting can obviously work well in holiday areas, but it can be done elsewhere too. For example, my sister Annie lives near Oxford and sometimes offers accommodation in her home through Airbnb to visiting academics and people coming to business meetings and conferences in the city.

There are other, similar options to Airbnb you may like to check out as well. They include Vrbo, Homestay, Booking, and more. They all operate a bit differently and offer a different range of accommodation and services (e.g. Vrbo is specifically for holiday rentals).

Closing thoughts

If your circumstances allow it, letting a room in your home can be a great way of making some extra cash. It will provide you with a regular, ongoing source of income, which could prove a lifeline in these financially challenging times. And you can choose between getting a full-time lodger or offering short-term lets. The latter is likely to entail a bit more work but may suit some people better.

As always, if you have any comments about this article, please do leave them below.

Nick Daws writes for Pounds and Sense, a UK personal finance blog aimed especially (though not exclusively) at over-fifties.

Photo by SHOP SLO® on Unsplash

The post Make extra money renting a room appeared first on Mouthy Money.

Expert deals finder Will Pointing suggests some ways of making cash from your extra space.

Space has never been at such a premium, particularly in the big cities in the UK. People are searching for limited space from spare rooms, a car-free garage or even an open parking space.

If you are fortunate to have space you don’t use, consider making some passive income and renting it out. Below are some ideas and information to help you make the plunge in to renting out your space.

Tips to get you started

Renting out space you’re not using is a a perfect way to earn fairly passive income, whether it’s to help pay your mortgage, save up for upgrades or set money aside for a holiday.

Before listing your spare space though, do a few key things to make it more marketable:

1. Take some high-end photographs. Try to use a proper camera, whether that be renting one for a day or finding a friend who has one. It’ll look much better than smartphone shots.
2. Write up a clear sales-y description. Being able to properly describe what you’re selling will make a huge difference as it will be more searchable and also easier for a customer to understand.
3. Add a competitive price. Pricing way above what other similar sellers are offering will make your space unaffordable. Do your research and price in the right way.

Here are four great spaces you can rent out, and how to go about it.

1. Rent out your spare room with Spareroom

Some 34.8% of people in the UK are renting according to a recent survey by Statista. So help them out and rent out your spare room.

Worried about paying tax? No need, the Rent a Room scheme is a government incentive that allows landlords and live-in landlords to earn £7,500 of tax-free income every year, by letting out a spare furnished room in their property.

There are a few sites to list your spare room, the largest and most renowned being spareroom. Spareroom is the UK’s busiest flat share site with over eight million registered users that will help you find a new flatmate fast, with the option of posting a free ad.

You can expect lots of enquires to filter out but hopefully you’ll find your next ideal flatmate.

Alternatives to Spareroom include Badi, Ideal Flatmate or Kangaroom.

2. Host your place on Airbnb

If you can’t quite deal with someone living with you long term, try hosting your home by renting out a room on Airbnb. Hosting can help you turn your extra space into extra income.

Enjoy the flexibility of being your own boss, earn extra money, and make lifelong friends through hosting. Hosting with Airbnb for the first time? Earn £7 as a sign on bonus.

Rest assured, in the rare event your property is damaged during someone staying at your place, you may be protected with up to $1,000,000 USD primary liability insurance.

Alternatives to AirBnB include Homestay, Plum Guide or Vrbo.

3. Rent out your spare garage on Stashbee

We live in an era where people have more belongings than they’ve ever had before. People have enormous amounts of literal baggage.

If you have a garage empty and collecting dust, it could be making money for you as storage for others instead.

Easy-to-use platform Stashbee connects individuals who have spare space (such as Garages) with those who need it. It is essentially Airbnb but for storage. People will put their things in your spare space and you’ll collect a fee.

In some ways its better than AirBnB because you don’t even have to deal with people in your house on a regular basis.  

At the time of writing when you join Stashbee you’ll benefit from a £50 joining incentive.

Alternatives to Stashbee include Store at My House or Storemates.

4. Rent out your parking space on YourParkingSpace

Do you live near a popular area, like a train station or shopping centre? Regular drivers into your area may prefer to rent your parking space than use a money-guzzling parking meter.

Depending on your area, you could net up to £200 a month, just for letting somebody park in your drive or garage.

The YourParkingSpace platform connects drivers with over 350,000 privately owned and commercially operated parking spaces across the UK, available to book hourly, daily, or monthly basis. Why not list your space for free and see what you can earn.

Other providers include Justpark.com, Parklet.co.uk or Parkonmydrive.com.

Photo by Ketut Subiyanto from Pexels

The post Four ways to make money from your spare space appeared first on Mouthy Money.