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Kristian Charles Williams

Kristian Charles Williams

Sep 25, 2021

Airbnb and the tax information you need as a host in the UK

With Airbnb comes (great responsibility) oh. and. Tax. and Airbnb hosts need to be aware of what is required their taxes.

In this blog post, TAXO'D aims to cover all of the essential tax information you need as an Airbnb host in the UK

Airbnb has become the most popular travel and hosting site. It covers every type of global accommodation you could ever dream of. Catering for travellers on a budget to business travellers with money to blow (and everyone in between.) Airbnb also offers travel experiences and weird and wonderful getaways.

In a little over a decade, Airbnb has blown up in both bustling, urban cities and quieter, rural villages (hosting approx 8.6 million travellers a year to the UK.) And that's 8.6 million potential paying customers to host in your home or your second property. (If you haven't done so already, Just log in air bnb and see what is available - you probably won't book a hotel ever again.)

Whether your looking for an Air bnb Cardiff or an Airbnb Northern Ireland .. here in the UK you really are spoilt for choice.

Can I rent my spare room on Airbnb?

Yes!

Can I rent my entire property on Airbnb? Yes!

Can I make money by renting my home out on a short-term holiday let via Airbnb.Yes!

You can make a lot more money than you would do normally renting your property via an AST (Assured Shorthold Tenancy) with lots of people giving up their day jobs and opting to Airbnb host full time.

More money from renting? Sounds idyllic right? but there are UK tax rules you need to be aware of and comply too (not Airbnb taxes). Many hosts have fallen foul to these over the years (from negligence or misinformation) so TAXO'D has put together a checklist so you lovely people can ensure you are being compliant.

Do I need to declare income as an Airbnb Hosts?

Many guests will ponder the question : when do you pay for Airbnb? and many hosts will ponder : when do I pay HMRC for Airbnb ! Broadly speaking, if your total yearly income from Airbnb is less than £1,000 then you do not need to declare this income to HMRC. Anything above this amount then the simple answer is Yes - you need to tell the taxman about your income from Airbnb tax UK.

(HMRC Airbnb Tax. Check. Check and Check)

TAXO'D blog - Airbnb Tax

What is Rent a Room Allowance and will renting a room on Airbnb qualify for RaR relief?

If you rent out a single furnished or unfurnished room on Airbnb (and it's in your main residence) then the good news is this will be a separate tax-free allowance from your main income. This is called Rent a Room relief or Rent-a-Room Allowance. HMRC stipulates that you do not have to pay tax on the first £7,500 you earn from this rental every tax year.

To qualify for the Rent a Room scheme Airbnb you need to be in the property yourself (pretty much all of the time) as this is to stop homeowners abusing the RaR scheme, where they move out and rent their homes during high-demand times (ie sporting events or concerts)

TAXO'D TOP TIP - You can’t claim back any expense costs if you are using RaR relief. Do your due diligence by estimating tax bills with different allowances and reliefs factored in to ensure you’re maximising your take-home income as you may actually limit the tax you owe WITHOUT RaR relief. 

Your income up to a certain amount is 'tax-free', but once this income exceeds your ‘Personal Allowance’ (£12,500 as of 2020/21) you will need to pay income tax. Any earnings from Airbnb will be added to your other earnings (making up your 'total taxable income') and it is on this amount the taxman will calculate your tax.

Obviously, you will have a certain amount of your earnings 'tax-free' (according to your income tax personal allowance) and the further good news is that you will be able to claim a plethora of expenses doing Airbnb. The kind of expenses you can claim include:

  • General maintenance and repairs (but not the cost of large home improvements)
  • Utility bills and Airbnb council tax
  • Ground rent and service charges
  • Building and contents insurances
  • Services such as Airbnb cleaning or gardening
  • Cost of letting the property such as advertising, agents’ fees and Airbnb legal costs.
  • You can also claim the costs that Airbnb charge you and other services associated with it.

You will declare your income from Airbnb (Airbnb income tax UK) in your annual self assessment tax return. (Paper, online or in a tax solution app)

Tax return apps and accounting software are ideal for this.

A tax filing app like TAXO'D, can eliminate the need for an accountant altogether and can keep track of all your income and expenditure throughout the year. You can then use TAXO'D app to submit your end of year self-assessment direct to HMRC from your mobile phone. 

Saving you heaps of time and money. Your tax return, done. Easy. 

TAXO'D blog - Airbnb Tax Information UK

How much tax do I have to pay on Airbnb income?

As discussed above, any income above your Personal Allowance (minus any reliefs eg. RaR relief) will be taxed just like all other types of income. This rate depends on what tax band you are in. In Wales, England and Northern Ireland these rates are currently 20% for basic rate, 40% for higher rate and 45% for additional rate. 

Do I need to charge VAT on Airbnb property?

If your Airbnb income from rentals exceeds the current VAT threshold of £85,000, then Yes - you will need to be VAT registered and will need to add a VAT charge of 20% on the rent. 

Can I get tax relief on Airbnb income?

If the property you are renting on Airbnb is not your main home it may qualify as a furnished holiday letting (FHL), and you may be entitled to several forms of Capital Gains Tax (CGT) relief.

  • Entrepreneurs’ Relief – A 10% Capital Gains Tax rate instead of 28% when you sell your property
  • Rollover Relief – If you sell one Airbnb residence and buy another, you can defer Capital Gains Tax on the sale of the initial property (you only defer paying the tax however)
  • Capital allowances for property furniture and fittings
TAXO'D blog - Airbnb Tax Information UK

Can I use tax software with Airbnb income.

Absolutely, tax is made so much easier with tax software and tax filing apps. These accounting apps play a pivotal role in making sure you are being compliant with all tax requirements for freelancers and the self-employed in the UK.

With tax software you can mitigate the headache of dealing with the tax associated with renting your home on Airbnb or anyone of its competitors:

With TAXO'D tax return app, you can input your earnings (Airbnb invoice etc) and outgoings (Airbnb receipt etc) as you go and be advised 'in-app' what tax you owe and when you have to pay it. Your TAXO'D 'Tax Profile' is set up in a matter of minutes and we ensure you enjoy every tax relief that is available to you and we automate all the repetitive tasks involved in filing your self-assessment.

Know what you owe and when you owe it. You will never pay too much tax ever again.

TAXO'D is tax calculating software that makes tax filing simple and fast.

With TAXO'D tax filing app you can submit your end of year tax return direct to HMRC from your mobile phone. You don't even have to get dressed! #fileyourtaxinyourpants with TAXO'D personal tax app.

Disclaimer: This is simply a guide and should not be treated as tax advice. Contact HMRC directly if you need tax advice.

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TAXO'D blog Author

Kristian Charles Williams

Head of Growth, Partnerships & Mugician

A freelance human and one that resides in creative industries. For the best part I have been an independent musician and a (not-so-independent) composer.

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