Budgeting and sharing costs when renting

When you’re renting a property with other people or have shared housing costs, it’s vital you know what your monthly outgoings will be and work out a system for paying shared bills.

If you don’t, you could find yourself in serious financial trouble – even if you’ve paid your share of the bill. In many cases you will have signed an agreement that holds you responsible together for certain costs.

So stay MoneFit and best friends with your housemates or partner.

Why it's vital that you pay your bills on time

It’s important to be organised about money when sharing a property. If you miss a payment or don’t pay your bills on time, you can get a bad credit rating, which will make it difficult for you to borrow money in the future - for example to get a personal loan to buy a car or a mortgage to buy a house. This applies even if the bill wasn’t only in your name and you paid your share.

did you know?

You are responsible for ensuring any bill with your name on it is paid, whether or not you ran up the costs.

If you don’t pay your bills, you may also find that vital services – such as your heating or phone line – are cut off.  If you fail to pay some bills, such as Council Tax or your TV licence, it could lead to a court summons - see Council Tax arrears. 

Typical bills you will need to budget for

These include:

Work out how to share your bills

At the start of a shared tenancy, it’s a good idea to sit down with your housemates  to work out a fair system for sharing the cost of your bills and ensure they're always paid on time.

  1. Write down a list of the shared bills you'll each need to contribute to and estimate how much they will be every month. Your landlord may be able to help you with the estimates.
  2. Add up the total cost of these bills and work out a method for dividing it so that each housemate pays their fair share.

It may be helpful to draw up a spreadsheet showing exactly what each person needs to pay into the ‘pot’ to cover the monthly/quarterly bills. 

Then everyone can see how it has all been worked out.

The cheapest and most simple way to pay household bills is by Direct Debit. You’ll also have peace of mind that the bills will always be paid on time, provided there is sufficient money in the bill payer’s account when the payments are due.

Alternatively you could decide that one of you should collect the cash from the other flatmates each month and pay all the bills at a bank or post office. However this relies on everyone being very organised and could result in late payments - so pay by Direct Debit if you can. 

Whichever method you go for, make sure everyone understands their obligations, and how to pay. 

Your options if paying by Direct Debit

Nominate one person to be the designated bill payer who will pay all the bills from their personal account.

Everyone then sets up a standing order to pay their share into the nominated bill payer’s account each month. 

Make sure that the standing orders are set up to transfer funds to the bill payer’s account a few days in advance of the Direct Debit date to avoid problems if there are unforeseen delays with the transfers. 

See Direct Debits and standing orders to find how they work.

Set up a joint current account just for paying the household bills that each housemate pays their share into – and set up your Direct Debits from there. Only consider this option with close and trusted friends.

Before opening a joint account

Be aware that you're financially linked to the credit rating of anyone with whom you hold a joint account. 

It’s best to take this approach only with people you know well and trust. 

When you move out, be sure to close this account. In the meantime, make sure you all use it responsibly.  See Setting up a joint account.

Prioritising your bills if you start to struggle

After your rent, always pay your Council Tax (rates in Northern Ireland) and TV licence first - see Rent arrears.

If unpaid, these have more immediate legal consequences, whereas the others result only in the loss of services.

If you’re worried about being able to pay your bills it’s important to talk to your landlord or suppliers right away.

Use our Budget planner to work out how much money you have after expenses and whether you need to cut back to ensure you can pay your bills.

Last reviewed: 10/04/2018

This content has been provided by the Money Advice Service