Ask Reena Sewraz: How should my son and his friends split the bills in their student house?

Answer: My son is going into second year of university and moving into a house with friends. He wants to know whether he should split bills with friends in separate names or should they all be in the same name?

Answer: Working out how to share the responsibility of paying bills with new friends you’ve just made in halls or on your course can be awkward, but it’s vital your son gets the discussion going as the decisions could have long-lasting consequences for him well beyond university.

Rent for the majority of private student house shares won’t include bills such as gas, electricity, water, a TV licence or broadband (if everyone in the home is a full-time student they will be exempt from council tax). These will need to be set up with a named account holder and usually a bank account for direct debit payments to be taken from, when your son and his friends move in.

There’s no single right way to organise paying these bills in a shared house, but it’s important to think about how payments will be split fairly while ensuring all the bills are paid on time and everyone is comfortable with the risk they are taking on.

The decisions taken around paying bills in a shared student house could have long-lasting consequences well beyond university

An option is to have one housemate put all the bills in their name and everyone transfers what they owe each month to their account. This may seem like the simplest solution, but it means one person gets the reward of building up a credit history (some utility providers will report to credit reference agencies) but also takes on the risks if something goes wrong.

It’s important to remember whoever’s name is on the bill is liable to pay the entire amount. So if someone doesn’t pay their share, and no one else can cover it, the account might fall into arrears. This will lead to a default on the account holder’s credit history that could stay there for up to six years and impact their ability to secure another rental or credit such as a mortgage in the future.

One way to avoid any one person taking on all the risk and reward is to see if the bills can be set up with multiple account holders. This way each of the account holders has an incentive for the bill to be paid on time as they could be chased for payment and the impact (positive or negative) to credit reports is shared.

If setting up an account with multiple account holders isn’t an option they could instead each take on a bill or two each. A shared spreadsheet can help keep track or they could try a free bill splitting app that does all the maths for them. Splitwise, for example, allows you to request payments with groups of friends, add due dates and makes it clear what’s owed – there’s little point in sending someone £10 for the water bill if they owe you £11 for the gas and electricity – £1 will suffice.

After deciding what names are going on the bills some groups may find setting up a joint account where all bill payments are paid from an easier way to deal with sharing bills as it cuts out the hassle of repaying each other. But a joint account should only be opened with people you really trust. A joint account can create a financial link on your credit report and as everyone has equal access to the funds there’s a chance a housemate could dip into the cash and not replenish it, leaving the group short for upcoming payments. Setting up a standing order to each other’s accounts could be a better solution.

Student budgets will be tight and the last thing your son will want is to fall out with flatmates over money. Having an honest conversation early can ensure everyone knows where they stand and avoid leaving anyone out of pocket.

Reena Sewraz, Senior Money Editor at Which?