If you’re renting a council home or housing association property and you have a spare bedroom, then you could face a reduction in your Housing Benefit or Universal Credit.
While officially called the “under-occupancy penalty”, this is more commonly known as the “bedroom tax”.
If you’re above the State Pension age, you won’t be subject to bedroom tax, and a number of other exemptions apply as well. Regardless, it’s worth getting to grips with how the tax works, in case you need to appeal a wrong decision.
In this article, we will explain why this tax exists, what counts as a spare bedroom, how much you’ll be charged, and what you can do about it.
Why was the bedroom tax introduced?
The bedroom tax was introduced in 2012 as part of controversial reforms to the welfare system.
Supporters of the tax claim that it helps ease overcrowding and housing shortages by making people less tempted to seek council homes with more rooms than they need. Others argue that it reduces the problem of taxpayers bearing the cost of rooms that aren’t being used.
It was announced that the bedroom tax would be extended to pensioners in 2016, but public backlash pushed the government to reverse this decision.
Who is affected by the bedroom tax?
You will be subject to the bedroom tax if all of the following apply to you:
- You are over the age of 16 and under the State Pension age
- You receive the Housing Benefit or the housing element of Universal Credit
- You rent your property from a local authority or housing association
- You have what is considered a spare bedroom, even if you use it for another purpose, such as a study or office.
Bear in mind that if you receive the Housing Benefit, only you or your partner will need to be over the State Pension age to both be exempt. If you receive Universal Credit, you will both need to be over the State Pension age.
What counts as a spare bedroom?
The definition of a spare bedroom in the legislation is very specific, so if you have a bedroom that isn’t being used in the following ways, it will fall into the ‘spare room’ category.
- One bedroom can be used per person over 16 or per couple in a household
- Two children under 16 of the same gender are expected to share
- Two children under 10 are expected to share regardless of gender.
So, any bedrooms left over after taking all this into account are considered spare rooms.
How much bedroom tax do I have to pay?
If you are subject to bedroom tax, your deductions will depend on how many spare rooms you have. One spare room will see your Housing Benefit or housing payment of Universal Credit reduced by 14%, while two or more spare rooms will cut it by 25%.
Exemptions to the bedroom tax
There are a number of exemptions to the bedroom tax.
- As stated earlier, if you’re on Housing Benefit and either you or your partner are over State Pension age, you will be exempt from the bedroom tax
- If you are on Universal Credit, then both you and your partner will be exempt from the bedroom tax if you’re over the State Pension age
- If you or your partner receive regular overnight care from a carer or team of carers, you are allowed an extra bedroom
- An extra bedroom is also permitted for a disabled child who receives either the middle or higher rate of Disability Living Allowance and can’t share their room
- Approved foster carers are allowed an extra bedroom – even if between placements – as long as you have fostered a child or become an approved carer in the last 12 months
- If you have an adult child in the Armed Forces who normally lives at home, then you will not be taxed while they are deployed
- If you have an adult child who is a student whose main residence is your home, their room is not considered a spare room, assuming they don’t go more than 52 weeks without returning home (or six months if you receive Universal Credit)
- If you receive care, support or supervision from your landlord in supported exempt accommodation, you won’t be subject to the bedroom tax
- If your council has provided you with temporary accommodation following your being homeless, you may be exempt from bedroom tax
- If someone in your household dies and leaves a spare room, this will not be taxable for 52 weeks if you are on the Housing Benefit. However, this is only three months if you are on Universal Credit.
Can I challenge the bedroom tax?
You can challenge a bedroom tax decision if you feel as though it was made in error, or if you believe you are exempt. You may not have to pay the bedroom tax if, for example, you have taken in a friend, family member or lodger.
Contact your council or the DWP to challenge the decision
If you receive the Housing Benefit and you believe you should not be receiving the tax, you will need to contact your local council within a month of the decision. You can read more about how to do this on the Carer’s UK website.
If you are on Universal Credit and your housing payment is taxed, you’ll have to contact the Department of Work and Pensions (DWP) and ask for a “mandatory reconsideration”. If they don’t budge, you can appeal to an independent tribunal, though this will have to be within a month of the original decision. You can read more about challenging a Universal Credit decision on Shelter’s website and you can find out more about how Universal Credit works generally in our guide Everything you need to know about Universal Credit.
Taking in a lodger
You have the right to take in a lodger in your spare room if you have a secure council tenancy, or a secure housing association tenancy. This is most likely to be the case, assuming you are not a new tenant and you have not had your tenancy demoted. If you’re not sure, however, you can check on Shelter’s website for the definition of a secure council tenancy or a secure housing association tenancy. If neither of these apply to you, you’ll probably have to seek your landlord’s permission before renting a spare room out.
If you get Housing Benefit and rent out your spare room, it will no longer be subject to the bedroom tax. If you provide a meal – such as breakfast – to your lodger, then £20 of rental income and 50% of the income on top of this won’t be taxed, so it’s all yours. Your Housing Benefit is taxed at 65p for every additional £1 after this calculation, however.
For example, if your lodger were to pay you £220 in rent and you provide them with breakfast, you could take £20 of rental income tax-free. You could then receive 50% of the remaining income tax-free too, so another £100. Only the final £100 left over would be taxable, so £65 will come out of your Housing Benefit.
If you get Universal Credit, you will still be affected by the bedroom tax, even if you take in a lodger. However, all of your rental earnings will be tax-free, so you may still be able to offset your losses.
Having a friend or family member staying long-term
If a friend or family member moves into the spare room, it won’t be subject to the bedroom tax. However, you may still be subject to certain financial penalties depending on their income level.
If you get Housing Benefit, you will receive a “non dependant deduction”. If your “non dependant”, as they are called, is out of work, then this will be £15.85 per week. See below for how much the deduction will be if they are employed.
|Non-dependant’s weekly income before tax
|Weekly non dependant deduction
|Less than £149
|Between £149 and £216.99
|Between £217 and £282.99
|Between £283 and £376.99
|Between £377 and £468.99
|£469 or more
If you receive Universal Credit, you will get a deduction known as the Housing Cost contribution. This is set at £75.53 per month for each non-dependant adult who lives with you. The benefits system is notoriously complicated, so if you’re not sure whether the bedroom tax applies to you, seek advice from your local council or Citizens Advice. You can search for your local Citizens Advice here.