Taking in a lodger affects both Housing Benefit and Universal Credit — lodger income must be declared to DWP, and most of it reduces your entitlement. Here is a full guide to the rules for 2026/27, including the disregards that apply and how bedroom entitlement is affected.
Housing Benefit: How Lodger Income Is Treated
For Housing Benefit claimants (mostly pensioners and some legacy benefit claimants):
| Lodger income | Treatment |
|---|---|
| First £20/week | Disregarded — does not affect Housing Benefit |
| Amount above £20/week | Counted as income — reduces Housing Benefit |
Example: You receive £80/week from a lodger. £20 is disregarded, leaving £60 counted as income. If your Housing Benefit reduces by 65p for every £1 of income, this reduces your HB by £39/week.
Universal Credit: How Lodger Income Is Treated
For UC claimants renting privately:
- Lodger payments count as unearned income in UC
- UC reduces by 55p per £1 of lodger income (after any applicable disregard)
- There is no automatic UC-specific disregard for lodger income equivalent to the £20/week HB disregard — check with DWP as rules can vary by circumstance
- You must report the income each assessment period
Example: You receive £400/month from a lodger. UC reduction = £400 × 55% = £220/month less UC.
The Rent a Room Scheme: Tax vs Benefits
HMRC’s Rent a Room Scheme lets you earn up to £7,500 per year tax-free from a lodger if you rent out a furnished room in your main home. This is a tax exemption only — it does not affect how DWP treats the income for Housing Benefit or UC purposes.
| Rule | Tax | Benefits |
|---|---|---|
| Rent a Room Scheme threshold | Up to £7,500/year tax-free | Not applicable — must declare all income to DWP |
| Disregard | N/A | First £20/week for Housing Benefit |
Bedroom Entitlement and the Bedroom Tax
If you are a social housing tenant (housing association or council), taking in a lodger has two effects:
- Lodger income reduces your Housing Benefit or UC housing element as described above
- Bedroom occupation — the lodger now occupies a room that was previously deemed spare. If the bedroom tax (spare room subsidy) was reducing your Housing Benefit or UC because of a spare room, the lodger occupying that room removes the spare room deduction
The bedroom tax deductions are:
- 14% of rent for one spare bedroom
- 25% of rent for two or more spare bedrooms
If your lodger eliminates a spare bedroom, you recover these deductions — which can be a net positive even accounting for the lodger income being counted.
Worked Example: Carol, Social Housing Tenant
Carol has a 3-bedroom social housing property. Her two adult children have left home, leaving her with 2 spare bedrooms. She is subject to a 25% bedroom tax deduction.
- Rent: £600/month
- Bedroom tax deduction: 25% = £150/month reduction in UC housing element
Carol takes in a lodger at £350/month, occupying one spare bedroom.
Changes:
- Bedroom tax falls to 14% (now only 1 spare bedroom) = £84/month deduction (saving £66)
- UC reduces by lodger income: £350 − £20 (disregard per week ≈ £87/month) = £263/month × 55% = £145 UC reduction
Net position: Carol is worse off by approximately £79/month — the UC reduction outweighs the bedroom tax saving. However, she gains £350/month cash income, so she is substantially better off in total.
What You Must Report
You must tell DWP or your council:
- When the lodger moves in
- How much they pay you (including any non-cash payments)
- When they leave
Failure to report counts as a change of circumstances and can result in overpayment recovery.
See our housing benefit family landlord guide, housing benefit property abroad guide, and Universal Credit guide.