Renting my spare room to neighbours as their office - a good plan or not?

[BloodyBen10]

I have lovely next-door neighbours. They will soon be moving out for four months while they have some remodelling work done on their house. They run a business from home, and so need to find either a rental property big enough to include a home office, or are looking at a smaller property to live in and relocating the business elsewhere for a while.

When my neighbour told me about their plans, I wondered about offering to let my spare room to them. It would be convenient for them (being close to the build - they plan to be on site at least once a day anyway, and they wouldn't need to change their business address), and would give me an extra few hundred quid a month - which would be very helpful at the moment.

My main worry is somehow complicating our friendship, which I would hate to do, as they really are lovely. I'm also wondering if I have to pay extra council tax (or something similar) while they're working in my house?

Grateful for any thoughts about this.

Oops. That should have been "Letting my spare room to neighbours ..."

God, I need more sleep.

Presumably you would have to declare it as taxable income.

Cons - what about tea & coffee etc? Do you let them use your kitchen? And using your bathroom etc - happy with that? What if you're doing something noisy - even hoovering is loud if you're trying to concentrate.

We rent our garage to our neighbour. You do have to declare it for income tax (don't know about council tax angle, sorry) but if you get on well with them and they're respectful people I can't see why it wouldn't work.

You would have to think about whether they are likely to have to work very late, and if so, if that would impinge on your family life. If you have young DCs you'd have to think about protecting their space - no yoghurty toddler fingers on their computer.

You might have to run it past your home insurance company too. Our neighbour's car is insured under his own policy and we have no liability for any damage to it.

I think it sounds like a good idea, if you all got your expectations down on paper in advance and agreed what you would stick to.

Would it come under the rent a room scheme, where you can earn non-taxable income? Or is that only for proper lodgers? Could you somehow fudge it so they counted as a lodger?

www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4017804

In terms of ruining your friendship, I think if you discuss the things hassled mentions before hand you should be fine. Especially as you know it is for a fixed term. I would worry about entering into something open ended, but I'm very conservative when it comes to mixing biz with pleasure... Also, I'd say as soon as possible what you would be expecting in terms of rent so that if it makes it out of bounds for them, they wouldn't have to pull out at the last minute.

I think that it is definitely worth thinking about doing. You would probably need to:

have an agreement with them in writing re: access to room generally, bathrooms, kitchens, noise in teh house during certain times (them and you), rent charged, do they need to be able to lock the room (if only to keep your DCs out if too young to do so otherwise), likely duration of occupation, ability to review the situation if it is not working

Agreeing this stuff up front makes things easier in the long run

You would need to declare income as tax.

You might also need to inform your house insurer and mortgage co

Be very careful about whether they change their business address.

This could then mean that as a business is being run from your property it is no longer liable to Council Tax, but business rates.

It would also have implications for your mortgage.

And insurances too if you have non family members having key access.

I would say no, don't do it.

But then I am in property management and I know ALL the downsides so I am a doom-monger

If you do decide to do it, please check all the relevant paperwork with the council and your mortgage company.