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Can I take a lodger on ESA and PIP in my privately owned home without losing money?

Lilegg

Hi Thanks for being here! I receive Income related ESA with that component beginning with D ( sorry I am struggling with memory issues at the moment - I will try to find the reference to this) plus PIP ( I failed to get the top rate for mobility needs on my recent assessment this time) and with full council tax benefit. I feel it would be far too complicated to have a lodger but a person I really get on with has expressed an urgent need to move to the area where I live and I have the spare bedroom and furthermore wish to give and to create some community for myself too. This is owing to exhaustion, loneliness and my very variable state of physical and cognitive health. Another realted thing I need help with is that I am wary of the Gov. website becuase I can't remember how to keep myself safe from the govt having more access to my info than I wish. Please can you remind me/direct me to a source of info about this? My privacy is key where govt is concerned. I will omit nature of my disability from here for now at least for sake of simplicity and clarity!

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calcotti

If you currently live alone and get a 25% discount on your Council Tax taking a lodger will lose you that discount. If your Council Tax Reduction covers all of your Council tax that will not matter but if you are required to pay something the amount you have to pay will increase.

The income you receive from your lodger will be taken into account for ESA subject to a £20/week disregard.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1063461/dmgch51.pdf

Income from subletting

51112 Where a claimant sublets part of the home the DM should
1. add together all payments made for the week by that subtenant and/or a member of the subtenant’s family and

2. disregard

2.1 £20 or

2.2 the whole of the amount paid where the total is less than £20.

Note: In this guidance “home” means the dwelling occupied as the home.

Lilegg

Thank you so much Calcotti. I do pay some of my council tax. I am thinking that the CT reduction of 25 percent may be the amount I would need to pay? That may be too simple but is a place to start. I think I have remembered the rule about privacy protection on the gov. website now.

calcotti

Lilegg said:

Thank you so much Calcotti. I do pay some of my council tax. I am thinking that the CT reduction of 25 percent may be the amount I would need to pay? That may be too simple but is a place to start. I think I have remembered the rule about privacy protection on the gov. website now.

You have a Council Tax liability. Because you live alone you get 25% off. You then qualify for Council Tax Reduction but rules for this vary, some councils will cover all of the CT, others only a percentage. If you live in a council that provides less than full reduction you will be paying something.
Say your full Council Tax would be £1200/year and your maximum CTR is 80%.
Your existing calculation is likely to be £1200 - 25% = £900 - CTR £720 (80% of £900) = £180 to pay. With a lodger it becomes £1200 - CTR £960 (80% of £1200) = £240 to pay.
The above assumes that because you will still be getting income based ESA that the council will give you full CTR (to the maximum they allow). Unfortunately, because councils can vary the rules, that may not be the case and they may take the lodger income into account. Because of the variation in rules it isn't possible to give a definite answer.

Lilegg

Thanks! It runs out I would lose a great deal of my CT Benefit and cannot afford to have a lodger. I am so disappointed. I was fortunate to have a phone interview with a local welfare rights team. I am told that many people choose to charge only £20 for rent and I would be happy to do this but I would lose a component of both Council tax benefit and of my enhanced disability part of ESA unless my lodger were to become my carer, with all that woudl entail socially and in other ways ( such as her having to give up her current job and vocation to care for me). It is all very messy so I hope great hearts and minds in our community can generate some ways of having others live with them. A more interabled world would be wonderful.

Lilegg

Calcotti, Would more specific info be helpful to the group, of how this breaks down? It may eb possible for me to ask the advisor I used to write an email to me. I coudl copy and paste with his permission and the caveat that areas vary in thier rules. I am a tad dyslexic so forgive any unseen typos folks.

calcotti

Lilegg said:..I would lose ..my enhanced disability part of ESA ,

I don't see why. It would still be included in your ESA but the actual payment would be reduced by any income in excess of £20/week.

Lilegg said:.. I would lose a great deal of my CT Benefit

It does depend on the rules for your local authority.

Lilegg said:

Calcotti, Would more specific info be helpful to the group, of how this breaks down?

I'm not clear what you are referring to.

Lilegg

I will put your comments in an email to the professional advice person here who advised me Calcotti, if you like and if you give permission? He can hopefully explain which might help others too. I think some of it is local rules but I think it is the disability component I get owing to living alone which I would lose plus an money I might need to charge for bills.

calcotti

If you are referring to a Severe Disability Premium you will not normally lose this by taking a lodger. You will still be treated as living alone for ESA (unless the lodger is a close relative) if the lodger is liable to make payments to you on a commercial basis.

See
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1067480/dmgch44.pdf
paragraph 41139

I think there may be a grey area if you are only charging £20/week because that may not be considered to be a commercial basis. I vaguely recall a discussion about that but unfortunately I can’t recall the details.

Sue_Alumni

Hi,

I think there is a concern that in taking in this lodger you could lose your severe disability premium (SDP). Once lost you would not be able to reclaim this if and when your lodger moved out. You are paid the SDP because you satisfy all of the following criteria (1) you are in receipt of a qualifying benefit, and (2) no-one receives carer’s allowance in respect of the care they provide for you and (3) you live alone. It is (3) that is the problem area.

However,

1.For the purposes of ESA someone is only counted as “normally residing with you” if you share accommodation apart from a bathroom, lavatory or a communal area such as a hall or a passage way. See ESA Regulations 2008 Part 9 regulations 71 (6) and (7). This regulation does not refer to a kitchen area.

The Employment and Support Allowance Regulations 2008 (legislation.gov.uk)
(6) For the purposes of this regulation a person resides with another only if they share any accommodation except a bathroom, a lavatory or a communal area but not if each person is separately liable to make payments in respect of occupation of the dwelling to the landlord.
(7) In this regulation “communal area” means any area (other than rooms) of common access (including halls and passageways) and rooms of common use in sheltered accommodation.

2. If your lodger is separately liable to pay for the accommodation then that does not count as residing with you. You would need to show there was a legally enforceable contract between you and the lodger.

3.Your lodger should not be counted as a non dependent if:-

They receive a qualifying benefit for the SDP, or

They are certified as sight impaired, or

They are staying in your home but they normally live else where. Are you providing a room for this person on a temporary basis or is a more permanent arrangement envisaged ?

4. If your lodger claimed Carers Allowance in respect of the care she provided you- you would lose the SDP.

calcotti

Sue_Scope said:

I think there is a concern that in taking in this lodger you could lose your severe disability premium (SDP). Once lost you would not be able to reclaim this if and when your lodger moved out.

That is not correct. If OP no longer met the conditions for SDP they would lose. But if circumstances change and they then meet the conditions again, as long as they are still on income based ESA, they could reclaim the SDP.

Sue_Alumni

Yes of course provided OP on still on irESA.

calcotti

Sue_Scope said:

Yes of course provided OP on still on irESA.

But that isn't what you wrote so I just wanted to clear that up for OP (any anybody else reading this). I think the issue resolves around whether charging only £20/week (in order to avoid deduction from the ESA) risks being seen an not a commercial arrangement.

OP. It's more important for you to decide whether having a lodger would be good for you. If you like the idea then charge them a sensible rent and draw up an agreement. You will retain the SDP in your ESA calculation but your ESA will be reduced by the rent (less £20). Financially you will gain £20/week.

If it's all a bit of a pain then the financial gain of £20/week probably isn't worth it.

Lilegg

Thank you so much Calcotti. I will ponder on all of this. So glad I posted and I will feedback to the welfare Rights person I spoke to, what you and Sue_Scope have said.

Lilegg

Calcotti and Sue, some questions about having a lodger in my privately owned house; 1. I am puzzled now by the matter of whether, if I draw up an agreement and charge a proper rent as you suggest, letting my lodger use only the allowable parts of my home, I would lose my SDP by not being alone any longer and 2. Whether I could pick up my SDP again if needed? 3. Am I allowed under the rules to let my lodger share my kitchen? Is it not a basic need for a person to have access to a kitchen? 4. Would my home be inspected for suitability (I intend to keep to the rules but feel bothered about inspections as such as it feels intrusive). 5. If I lose my SDP and 25 percent of my council tax benefit ( I understand that I would although ought to check current local rules I suppose) I will possibly lose money, certainly short term. Can I prevent this or do anything else about it? 6. I may have misunderstood him but my adviser may have said ( again I was stressed and suffer brain fog) that I coudl not keep any income unless, perhaps I had my lodger as my carer but, in that circumstance my lodger need to work a great many hours per week to qualify for the allowance and she has FT employment already. I am also in receipt of PIP. Thank you so much for all the help. I should add that I am an older person and after much struggle, have paid off the mortgage. Grateful to have a home. To answer you question Sue _Scope about lodger and how long they would want to stay, we have not discussed this yet as we seemed to stumble at the first fence, owing to benefit rules.

calcotti

Lilegg said:

Calcotti and Sue, some questions about having a lodger in my privately owned house; 1. I am puzzled now by the matter of whether, if I draw up an agreement and charge a proper rent as you suggest, letting my lodger use only the allowable parts of my home, I would lose my SDP by not being alone any longer

As I have tried to make clear, a lodger who is paying a commercial rent to you is not a non dependant and therefore does not affect your SDP.

Lilegg said:
2. Whether I could pick up my SDP again if needed?

Provided you are still getting income based ESA the SDP can be included for any period during which you meet the qualifying conditions so the answer is yes.

Lilegg said:
3. Am I allowed under the rules to let my lodger share my kitchen? Is it not a basic need for a person to have access to a kitchen?

Of course they can - as you say it's a necessity (the only part of the house they should not be sharing is your bed because then you would be a couple.)

Lilegg said:

4. Would my home be inspected for suitability (I intend to keep to the rules but feel bothered about inspections as such as it feels intrusive).

No.

Lilegg said:
5. If I lose my SDP and 25 percent of my council tax benefit ( I understand that I would although ought to check current local rules I suppose) I will possibly lose money, certainly short term. Can I prevent this or do anything else about it?

That is covered in previous replies.

Lilegg said:
6. I may have misunderstood him but my adviser may have said ( again I was stressed and suffer brain fog) that I coudl not keep any income unless, perhaps I had my lodger as my carer

Simply not correct.

Lilegg

Thanks so much Calcotti. Thank you for reiterating. In defense of my advisor they said I would lose the money my lodger paid apart from £20 and ( one of them said) 50% of rent?? Thye are more specialists in helpignwith cliams and assessments. I imagine I would not be allowed to charge for a proportion of the bills as this should be included in my rent of course My advisers have put me in touch with SpareRoom.co.uk. They can't help over benefits questions. Thankfully you can. I am grateful indeed!

Lilegg

I should add that I haven't been able to get through to ESA or rather, I get so far and then get the instruction to please hang up! is there a better number to ring than the one on the routine letters they send? At least I feel more confident that I won't lose my SDP now but wish to hear it from the ESA themselves, as rules change frequently and with little notice. Council tax needs checking too. Many thanks again.

calcotti

Lilegg said: I imagine I would not be allowed to charge for a proportion of the bills as this should be included in my rent of course My advisers have put me in touch with SpareRoom.co.uk. They can't help over benefits questions.

I think for a lodger it would be normal to set a rent amount which includes bills but it's not an area I know much about.

The loss of rental income apart from £20 is correct.

I'm not sure SpareRoom is relevant to you as you have a particular person you are considering taking as a lodger. i get the impression that SpareRoom is more of a matching site to link prospective landlords with people who are looking for somewhere. However, no harm in checking them out.

Sue_Alumni

Hello again,

As you know, if your lodger is separately liable to pay for the accommodation you are providing then that person will not be treated as a non dependent. I don't think the DWP will be able to tell you over the phone whether or not the agreement amounts to a commercial one and to confirm that you will not lose your SDP.

Case law suggests that, in itself, a low rent does not necessarily mean that the arrangement is not commercial and similarly an arrangement between friends could count as a commercial agreement. The DWP would need to see evidence of the basic terms of the agreement such as the names of the parties, rent, payment dates, term and notice period and termination provisions and the intention of the parties to enter into the agreement.

A market rent would suggest an intention to enter into a commercial agreement but it is not conclusive. A market rent could be difficult to determine. Your advisers have suggested looking at comparable rents on spareroom.com. Perhaps a comparison to the relevant local housing allowance your area would also be helpful. The amount of rent is further complicated as if too high it could impact on the income related ESA. This could be a particular concern if you are claiming contribution ESA topped up with income ESA. If the rent stated is considered by the DWP to be too low the DWP may consider it a sham commercial agreement made in order to preserve an entitlement to benefit and not treat it as a commercial agreement.

The agreement must also be a commercial agreement. You and the lodger must intend to enter into an enforceable legal agreement. Does this reflect the reality of your situation? The DWP may view your motivation to help out a friend in need and for you both enjoy reciprocal friendship and support may not be the basis of a legally enforceable agreement. However, it is not clear cut and as detailed above the DWP should look at all the circumstances of the case and should consider each individual case on its merits.

If the DWP accepts there is a commercial agreement the amount of “rent” or weekly charge taken into account as income for the purposes of your income related ESA depends on whether the letting is without board or whether board is included and I think this is what your advisers are alluding to

- Lettings without board –£20 of the weekly charge is ignored, the balance counts as income

- Boarders – the first £20 of the weekly charge is ignored and one half of any balance remaining is taken into account as income. The weekly charge must normally include at least some meals.

As detailed above, the amount of the weekly charge is likely to impact on the amount of irESA you are receiving and if you are receiving cbESA and ir ESA you may possibly lose entitlement to the income part of the ESA award and with it your council tax support. I would suggest you do a online benefits calculation to find out how your ESA will be impacted.

Benefits Calculator - entitledto - independent | accurate | reliable

As you are aware you are under an obligation to notify the DWP of a change of circumstances and someone moving into your home is a change of circumstance. It is not a given that the DWP will accept the agreement as a commercial one and it is possible that you will need to challenge that decision by requesting a mandatory reconsideration of that decision. If you are unsuccessful, you will not only lose the severe disability premium but you may have an overpayment claim from the DWP in respect of overpaid benefit.

If you lose your SDP because you are no longer residing alone provided you retain your ir ESA you will continue to be entitled to council tax support (but not the single person discount). If the lodger moves out and you retain your entitlement to ir ESA then you can reclaim the SDP. Even if you are on cbESA you can subsequently reclaim ir ESA. The DWP may resist this and tell you that you need to claim UC but this is not correct and you have a choice whether to reclaim ir ESA or to make a new claim for UC. You will not get a SDP included in your UC award. If someone shares your home under an informal arrangement, whilst you will lose the SDP for the period they are living with you, any payment they make to you for living and accommodation, is ignored. This might be a sensible option for you to consider particularly if you want to preserve your entitlement to irESA. You say you are a home owner and so there will be no non-dependant deduction for housing costs

At the end of the day I suggest you do what works best for you. I would suggest you do a benefits calculation so you are aware of all your options. If you need help to do this citizens advice should be able to assist. It may be that if you do end up losing the SDP, you might be better claiming UC particularly if you have Support Group entitlement. You need to look into everything carefully as once you claim UC you cannot make a new claim for ESA and you will not be able to reclaim the SDP.

Lilegg

Hi Sue_Scope, I am definitely on ir ESA and no ohter kind.I am not sure what separately liable means here? Also don't understand that she might be not a 'non dependant' ( s a sepndant then) but we're not related or close freinds but friendly acquaintances who intuitively feel we could get along. It looks as though mutual help and support is being made extremely difficult and financially unsafe. I would welcome further comment and suggestions. Thank you so much!