A landlord's guide to renting to family members
You have an empty property, and a family member needs a place to live. Sound familiar? As a landlord, it’s surprising how often this scenario crops up. But can you rent to family members? And is it a good idea? The short answer is yes, you can rent to family members, but while it’s legal, there are some key considerations. You must treat it formally, declare rental income over tax-free thresholds to HMRC, and check that your mortgage lender and insurer permit the arrangement.
Written by our private rented sector experts, this practical guide to renting to family members outlines the legal, financial, insurance, and licensing considerations to help you avoid common pitfalls such as breaching your mortgage agreement, invalidating your insurance, issues with HMRC, and unlawful evictions.
Find out more information on tenancy agreements and tax as a landlord here.
Can you rent to a family member?
The short answer to ‘Can you rent to family members?’ is yes, you can legally rent to relatives, as long as you follow the same rules as when renting to other tenants.
In particular, you should:
- Check the terms of your mortgage to ensure it is allowed.
- Check that your landlord insurance is adequate for letting to family members.
- Have a written tenancy agreement in place and provide key information.
- Declare your rental income to HMRC, where required.
Key considerations before renting to a relative
There are many considerations when thinking of renting to a relative. We outline the key ones and their associated risks below.
Mortgage permissions
Requirements vary by lender and by product. If you are letting a buy‑to‑let property, check whether your mortgage permits letting to close family. Some lenders treat lets to close relatives differently and may require a regulated buy‑to‑let product depending on your circumstances. If your lender does not permit family lets, you’ll need to find a regulated buy-to-let mortgage that allows letting to a close family member.
Do I need landlord insurance if renting to family?
Most standard home insurance policies don’t cover letting, so you’ll likely need landlord insurance. You must let your provider know you intend to let to a family member, as failing to disclose this may invalidate your cover. Some insurers may not offer rent guarantee cover, viewing letting to family as a higher-risk option than average tenancies.
Setting the rent: market rate vs "family rate"
When renting to a family member, it’s common to consider charging rent below the going market rate. While this may seem like a good idea, it can lead to issues, including:
- Difficulty with your mortgage provider, as your lender may require the rent to cover a minimum proportion of the mortgage payments.
- Limiting your tax-deductible expenses on your Self Assessment.
The tenancy agreement
A written tenancy agreement is still essential when you are renting to family members. Under the new Renters’ Rights Act, most new tenancies are Assured Periodic Tenancies.
Deposit protection
If you’re taking a deposit from your family member, you’ll need to treat it like any other tenancy, protecting it in a government-approved tenancy deposit scheme and providing prescribed information within 30 days of receiving the money. Failure to do so may result in you having to pay compensation up to three times the original deposit amount.
HMRC rules on letting property to family members
Rental income from a family member is generally treated the same as income from any other tenant or lodger.
Declaring rental income
Do you have to declare rent from a family member? If you’re letting a rental property, you’ll generally need to declare property income above the £1,000 property allowance. If you’re renting a room in your home, you can earn up to £7,500 a year through the Government’s Rent a Room Scheme tax-free.
Thresholds and rules can change; check current HMRC guidance before filing.
The "uncommercial let" rule
Where the let is not on a commercial basis, HMRC generally caps allowable expenses to the level of rents received for that property. HMRC may consider a let to a family member at significantly below market value to be “uncommercial”, which can limit the deductibility of expenses. This does not mean that any below‑market rent automatically reduces allowable expenses, but significantly below‑market or otherwise uncommercial terms can have that effect.
Inheritance tax and letting rent-free
Allowing a family member to live rent‑free or at a nominal rent can have inheritance tax and other tax implications, including potential gift with reservation of benefit issues and impacts on capital gains or income tax treatment. Outcomes depend on individual circumstances and current rules. You should obtain advice from a qualified tax adviser before proceeding.
Do I need a landlord licence if renting to family?
Standard landlord licensing rules apply, regardless of your relationship with your tenant. You should always check with your local authority to see if there is a licence requirement.
Mandatory HMO licensing
If your property is an HMO, you may need a licence depending on the number of occupiers and households, and the facilities they share.
Additional and selective licensing
Many local authorities operate additional or selective licensing schemes, and you’ll need to check with your specific local team to see if any apply to your rental property.
Penalties for unlicensed letting
Penalties for not complying with licensing regulations can include large fines, criminal prosecutions, and banning orders, and may affect your ability to repossess your property if needed.
Eviction of a family member
The eviction of family members is never easy, and you must follow the same legal process as you would for any other tenant, or by providing them with reasonable notice if they are a lodger. Asking them to leave informally, or physically removing them from the property, could be considered an unlawful eviction.
Serving notice under the Renters' Rights Act 2025
Where the tenancy is an assured tenancy you will generally need to serve a Section 8 notice citing relevant grounds if you wish recover possession of your property.
Court possession and bailiffs
If your family member does not leave after the notice expires, you cannot forcibly remove them. Instead, you need to attend a court hearing to obtain a possession order, and then apply for a warrant for bailiffs to repossess the property.
What if the family member stops paying rent?
If your family member stops paying rent, they are in breach of your tenancy agreement, meaning you may be able to serve a valid Section 8 notice.
Best practice checklist for renting to a family member
When it comes to renting to family, always remember to:
- check with your mortgage lender
- enter an official written tenancy agreement
- check your landlord insurance
- protect any deposits taken
- comply with any licensing requirements
- charge fair market rent
- declare any rental income to HMRC
- follow the Section 8 process if seeking possession.
Following a clear process helps avoid mortgage breaches, insurance issues, tax problems and unlawful eviction
How we can help you
Looking for help letting to family members? Whether you’re looking for tenancy agreement templates or advice surrounding tax, licensing and legal considerations, our private rented sector experts can help. Our members have access to our expert landlord advice line and FREE property management software. Join the NRLA today and be part of our vibrant landlord community.
Assured periodic tenancy rent increase FAQs
Can I rent my house to a family member?
Yes, you can legally rent to a family member, however there are many legal, financial and mortgage implications to consider.
Do I need to tell my mortgage lender if I'm renting to a family member?
Yes, you need to tell your mortgage lender that you intend to rent to a family member, as it may not be allowed under the terms of your agreement or may require you to pay more or change the terms or product.
Do I need landlord insurance if renting to family?
Yes, standard home insurance policies often don’t cover letting, so you’ll need specialised landlord cover. You must also tell the insurer if you plan to let to family as non-disclosure may invalidate your cover.
Can I charge my family member reduced rent?
While this may be possible, it may affect your ability to get a mortgage or have tax implications.
Do I have to declare rental income from family to HMRC?
Yes, if your rental income exceeds the £1,000 property allowance, you must report it to HMRC.
Can I evict a family member from my rental property?
You can evict family members by following the correct legal process (usually involving a Section 8 notice), or by providing them with reasonable notice if they are a lodger.
Does the Renters' Rights Act 2025 apply to family tenancies?
Yes, the Renters' Rights Act 2025 applies to all standard residential tenancies, including those with family members.
Can I let a family member live in my property rent-free?
It may be possible to let a family member live rent-free, though it’s best to check with your mortgage provider.
What tenancy agreement should I use for a family member?
Following the introduction of the Renters’ Rights Act, most tenancies are now Assured Periodic Tenancies. Or alternatively, if they live in the same home as you, they may have a lodgers agreement.
Can I use the Rent a Room Scheme when letting to a family member?
Yes, if your family member is living with you as a lodger, you can use the Rent a Room Scheme.
What happens if my family member stops paying rent?
If your family member stops paying rent, you may be able to serve a Section 8 notice to start proceedings to regain possession of your property.
Can I let to family through a limited company?
While this is possible, it will involve additional tax considerations, so seeking professional advice is recommended.