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.