Rent and Credit > How does renting a property in the UK work?

How does renting a property in the UK work?

Wollit Team4 minute read · Updated 14th September 2024

Renting a property in the UK can be a bit different from other parts of the world. Here is what you need to do to rent a house or flat in this market, how the process looks like, and how your credit history comes into play.

Step 1: figure out your budget

The UK is not the cheapest place to rent. The typical London rent has hit a high of £2,633 in April 2024, with the average UK rent outside of the capital at £1,325. Considering that the average salary after tax in London is £2,955, and in the rest of the UK is £2,391, expect a very large chunk of your earnings to be spent on rent.

So before you start searching for a rental property, you need to understand your budget and what you can afford. Experts recommend spending no more than 30-35% of your annual income on rent.

To calculate your maximum monthly rent:

Take your annual salary before tax and deductions;
Multiply that amount by 30%;
Divide that amount by 12 to establish your maximum monthly rent.

For example, if you earn £30,000 a year gross, 30% of that is £9,000. Dividing £9,000 by 12 means you would have £750 per month to spend on rent.

You'll also need a deposit equivalent to five weeks' rent if the total annual rent doesn't exceed £50,000. If the rent does exceed £50,000, you'll need a deposit of six weeks' rent. Your landlord must protect your deposit in a government-approved scheme within 30 days of your tenancy starting.

Step 2: find a property

Once you've established your budget, you can start searching for properties in your desired area. The larger the area you're prepared to look in, the better your chances of finding the right home. You can:

Search online on websites like Zoopla, Rightmove, or Spareroom.
Use a letting agent.
Or even look for "To Let" signs in the neighborhoods you're interested in.

When viewing properties, check out the surroundings to get a feel for the neighborhood and distances to transport links and other local amenities. Make a list of your must-have features and nice-to-have features to help narrow down your search.

Step 3: apply for tenancy

Once you've found a property you want to rent, you'll need to go through the application process. Your letting agent or landlord will ask for several things to decide if you’re a suitable tenant, like:

References from your current or previous landlord;
References from your employer – or your accountant, if you’re self-employed;
Several months' payslips to prove your income – or a bank statement and tax return if you’re self-employed;
Bank statements showing your outgoings;
Proof of your identity and current address;
Proof of your right to rent in the UK.

Besides this, they might also run a credit check to look for any County Court Judgments (CCJs), insolvencies, or credit accounts linked to your name and address.

If you have a poor credit history or your affordability is a concern, your letting agent may ask for a guarantor to support your application. This is someone, usually a parent, who agrees to cover your rent if you're unable to pay it during your tenancy.

This is why it’s so important to build a solid credit history. One of the ways to do this is by signing up to a credit-building subscription like Wollit.

Wollit works by reporting a fixed fee monthly subscription as a loan repayment to the credit reference agencies (Experian, Equifax, and TransUnion). This helps you build or rebuild your credit history by showing that you can pay debt on time. It can even report your monthly rent payment to Experian, adding another line in your credit report that shows lenders you're responsible and pay your bills when they’re due. In time, this will help you improve your credit score so you won’t need to be worried about any credit check ever again.

Step 4: signing the tenancy agreement

Once your application has been approved, you'll need to sign a tenancy agreement. This is a legal contract between you and your landlord that sets out the terms of your tenancy.Make sure you read and understand the agreement before signing.

Your landlord must provide you with:

A copy of the 'How to rent: the checklist for renting' guide;
A gas safety certificate (if there's a gas installation or appliance);
Deposit paperwork (if you've provided a deposit);
An energy performance certificate;
A report showing the condition of the property's electrical installations;
Evidence that smoke and carbon monoxide alarms are in working order.

Step 5: move in

On moving day, you'll need to pay your first month's rent and deposit. Your landlord must protect your deposit in a government-approved scheme within 30 days of your tenancy starting.

Make sure you take meter readings on the day you move in and keep a copy of the readings for your records. You should also check the inventory and report any discrepancies to your landlord or letting agent.

What are my rights as a tenant?

As a tenant, you have certain rights and responsibilities. Your landlord must:

Keep your rented property safe and free from health hazards;
Make sure all gas equipment and electrical equipment is safely installed and maintained;
And protect your deposit in a government-approved scheme;

On the other hand, you're responsible for paying your rent on time, looking after the property, and reporting any repairs that are needed.

What happens when I end my tenancy?

When your tenancy comes to an end, you'll need to give your landlord or letting agent proper notice. Most tenancies have a minimum term of 6 months, and most landlords offer tenancies for a fixed term of 6 or 12 months.

If you want to leave before the end of your fixed term, you'll need to check the terms of your tenancy agreement. Some agreements allow you to give notice early, while others may require you to pay rent until the end of the term.

When you move out, make sure you leave the property in the same condition as when you moved in, minus normal wear and tear. Your landlord should return your deposit within 10 days of you moving out, as long as there are no deductions for damage or unpaid rent.

What else should I know about renting in the UK?

Again, renting in the UK is expensive. Over the long term, this can add to quite a bit. Luckily, UK has also implemented ways to make rent count towards your credit history, so that eventually your rent payments can help you get approved for a mortgage.

There are many tools you can use for this, including Wollit. As we mentioned, Wollit helps build your credit both through its subscription (which is reported as a loan repayment to all credit agencies) and through enabling you to add your rent to your credit report. This can add another line in your credit report that shows lenders that you’re reliable and pay your bills on time, helping you make the most of your rent while you prepare to become a homeowner.