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Should I rent to my family members?

Dipping your toes into the rental market? It can seem attractive and easier to simply rent to a family member.

But it isn’t as straightforward as you might think. Let’s explore the unique challenges and legal issues you’ll need to consider.

Dipping your toes into the rental market? It can seem attractive and easier to simply rent to a family member.

But it isn’t as straightforward as you might think. Let’s explore the unique challenges and legal issues you’ll need to consider.

Written by
Helen Phipps
Insurance comparison expert
Reviewed by
Rachel Lacey
Insurance and money expert
Last Updated
8 SEPTEMBER 2023
6 min read
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Are there any renting to family members laws in the UK?

There aren’t any UK laws to stop you from renting to family members. But you’ll need to tell your mortgage provider that’s what you’re doing.

Depending on your circumstances, you may find that they apply stricter lending criteria – or even won’t lend at all. This is because they may assume you’ll be a more lenient landlord if you’re renting to family.

Do I need to tell my mortgage provider I’m renting out my home?

If you have a residential, rather than a buy-to-let mortgage, you’ll need to let your mortgage provider know you’re letting the property.

If you don’t, you could be breaching the terms of your mortgage contract. The provider could charge you higher fees or interest. They could even make you repay your mortgage in full.

Do I need a tenancy agreement when renting property to a family member?

If you’re renting to a family member, it’s wise to have a tenancy agreement of some kind.

It might be tempting not to bother, but a tenancy agreement will make both of your obligations as landlord and tenant absolutely clear. This can help you avoid arguments down the line.

Do I need landlord insurance if I’m renting to family?

Regardless of who’s renting your property, it can make sense to have landlord insurance with rental protection cover in place.

Landlord insurance vs building insurance

Landlord insurance is similar to regular home insurance in some respects. The buildings insurance element will be much the same.

However, landlord insurance could potentially cover you if a tenant is injured in your property or doesn’t pay the rent.

What does landlord insurance cover?

You can expect your landlord insurance policy to cover:

  • Buildings insurance
  • Contents insurance – for any possessions you have at the property. Tenants will need their own contents insurance to cover their possessions
  • Loss of rent
  • Damage or theft by tenants
  • Legal action
  • Public liability
  • Squatter eviction.

Do I need a buy-to-let mortgage to rent to family?

If you’re buying a property to rent out, you’ll need a buy-to-let mortgage (that’s assuming you can’t buy the property outright).

You’ll need to check your mortgage terms – standard buy-to-let mortgages may not let you rent to family members, so you may need a specialist family buy-to-let mortgage.

If the property you’re renting out is your own home, you’ll need to contact your mortgage provider and ask for something called a consent to let.

Can my son or daughter live in my buy-to-let property?

Your son, daughter or another relative can live in your buy-to-let property. But again, you’ll need to make your mortgage provider aware of the situation.

Do I need a family buy-to-let mortgage?

If you’re letting your property to an immediate family member, you may need a specialist family buy-to-let mortgage. These are often more highly regulated than regular buy-to-let mortgages.

This is because mortgage providers see renting to family members as higher risk – it’s more likely you’ll be lenient and let them get away with paying less rent.

Can I rent just a room to a family member?

You can rent a room to a family member. However, if they pay you more than £7,500 a year, you’ll have to pay tax on the income.

Can I rent to a family member on benefits?

You can rent to a family member on benefits, but you’ll need to live separately and have a commercial tenancy agreement in place. Otherwise it could affect the benefits they receive.

What’s the legal definition of an immediate family member?

When it comes to mortgages, children, brothers, sisters, parents or grandparents can be classed as immediate family members. You may need a family buy-to-let mortgage if you’re letting to any of these.

If the family member is a cousin, uncle, or aunt, you may need just a standard buy-to-let mortgage. You’ll need to check with your mortgage provider to be sure.

Do I have to declare rental income from a family member?

If you rent out the whole property, it’s likely that you’ll have to declare the income and pay tax.

The first £1,000 of your property income is tax-free. If you earn more than that, you’ll have to report it to HMRC.

If you’re just renting a room, you can earn up to £7,500 a year through the Government’s rent-a-room scheme without being liable for tax.

What else do I need to think about when letting to a family member?

When renting to family, it’s wise to bear in mind the following:

  • You may be liable for tax.
  • You may be obliged to charge a certain rent – if you have a buy-to-let mortgage, you may be required to charge 125% or more of the monthly payment.
  • You’ll still need to meet health and safety rules – that means getting your annual gas safety check and Energy Performance Certificate, as well as having smoke alarms and carbon monoxide detectors fitted.

You have responsibilities as a landlord, even if your tenants are family. That means you can’t ask them to overlook issues with the property in exchange for cheap rent. 

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Helen Phipps - insurance expert

Having worked in both sides of the industry, Helen’s a real insurance expert. She’s worked directly with several insurance providers and now Compare the Market. She’s always searching for the cheapest prices for customers and is passionate about saving people money. Being married with two kids, Helen knows all about the cost of living and the benefits of having the right products and insurance for the whole family.

Learn more about Helen

Rachel Lacey - Insurance and money expert

Rachel’s a self-confessed money nerd who’s been writing about personal finance for more than 20 years. She spent 17 years writing for Moneywise, including a few years as Editor, and likes making complicated subjects like insurance, pensions, investing and tax, easy for people to understand.

Learn more about Rachel

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