How To Take Airbnb Tax Deductions As A Host

In recent years, Airbnb has taken the hospitality sector by storm. As one of the largest hoteliers in the world, Airbnb allows property owners to host their home as a means of generating income.

Due to its sudden emergence, there has been some misinformation regarding what Airbnb hosts need to do with regard tax. Specifically, whether or not there are certain expenses a host can offset against their Airbnb income.

To help bring some clarity, we’ve provided the ultimate guide to tax deductions as an Airbnb host.

Do I need to report Airbnb income?

Should your short-term rentals or Airbnb home earn you income in excess of the £1,000 per tax year trading allowance, then yes.

Do I automatically receive an Airbnb tax form?

There’s no specific Airbnb tax form. Individuals in receipt of Airbnb rental income

Your Self Assessment tax return is used to declare all income received during the tax year. Income from Airbnb is treated as rental income, as such you will to complete the supplementary page SA105 Income from Property.

If you are not already required to complete a Self Assessment tax return then you can register here. Please note that you must register no later than the 5 October after the end of the tax year in which you received your first income. For the year ended 5 April 2019 you should have registered by 5 October 2019 with you first tax return being due no later than 31 January 2020.

When you submit your Self Assessment tax return on (or prior to) 31st October, HMRC will calculate the tax owed and issue your Self Assessment tax bill. If you submit after 31 October you must do so online. However, HMRC will not guarantee sending you a bill before payment is due so you must use software to make the submission and calculation.

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

This very much depends on what other income you have and then the ‘profit’ made from your Airbnb income.

It also depends on whether you’re renting out a full property or a room of your own home. If the latter is true, then you may qualify for the rent-a-room allowance of up to £7,500 per year (splt if home is jointly owned) – provided you also live in the property part of the time.

However, if you’re renting a holiday home or separate property of any kind you’ll be taxed in the same way as a business owner. The rate of tax you pay (20%, 40% or 45%) then depends on your other income.

Do Airbnb properties have deductible expenses?

Yes, you are renting out a single room or rooms in your main residence then you may qualify for the rent-a-room scheme. This means that the first £7,500 of income is tax-free. Only paying tax on income higher than this. A great scheme that means you only have to keep records of income.

If you do not qualify for rent-a-room or you rent a separate propery then the normal rules on expenditure apply. Details of this can be found here.

How do you file for Airbnb taxes?

As mentioned above, you’ll need to collect all of your Airbnb documentation to build a fuller picture of your income and expenses. This information is added to our tax return to calculate any tax due.

Secondly, register for Self Assessment so that you’re able to declare your earnings before the 31st January online deadline.

Finally, remember to also include on your tax return details of all other income you received, even if you have already paid tax on this and HMRC have the details.

How we can help

If you’re still wondering how best to report Airbnb income, turn to GoSimpleTax. Our software works wonders when it comes to logging relevant income and expenditure. It may even highlight ways you may be able to reduce your liability.

Once earnings and outgoings have been logged, you can simply file your Self Assessment tax return directly to HMRC through GoSimpleTax.

Our team work tirelessly to make Airbnb letting straightforward without punishing the hosts. As you enhance your earnings, you’ll recognise the importance of paying exactly what you owe – otherwise you run the risk of falling foul of HMRC’s rules and facing their penalties.

So, sign up for the trial of GoSimpleTax software today and enjoy Airbnb hosting as it was intended.

Or if you are looking for further tax guidance as an Airbnb host, click here.

Last updated: 14th January 2020.

What is the income tax personal allowance for 2020?

WHAT IS A PERSONAL TAX ALLOWANCE?

Much to the disappointment of HMRC, every tax year most UK taxpayers are entitled to a UK personal allowance on their taxable income. To put it simply, most people can receive a certain amount of money before having to pay any income tax. This is what is known as a personal tax allowance.

If you’re struggling to get your head around personal tax allowances, GoSimpleTax is here to explain everything you need to know, simply and easily.

HOW MUCH IS THE STANDARD PERSONAL TAX ALLOWANCE?

The standard personal tax allowance amount is £12,500 for 2019/2020. Any income you earn after that will be taxable. The amount of tax you pay after your personal allowance is dependent on how much you earn during a tax year. For example, If your income is above £100,000, basic personal allowance is reduced by £1 for each £2 you earn over the £100,000 limit, irrespective of age.

Personal Allowance & Tax Thresholds

Personal Tax Allowance2018/20192019/2020
Tax-free personal allowance£11,850£12,500
Basic Tax Rate (20%)£1-£34,500 (after allowance)£1-£37,500 (after allowance)
Higher Tax Rate (40%)Income over £34,500Income over £37,500
Additional Tax Rate (45%)Income over £150,000Income over £150,000

If your tax affairs are a little more complex, for example, if you’re married or in a civil partnership and receive a marriage allowance, or for age-related or income-related reasons, then your personal allowance works a little differently. You could also receive tax-free allowances for:

  • your first £1,000 of income from self-employment
  • your first £1,000 of income from property you rent

HOW DO I GET MY PERSONAL ALLOWANCE?

Getting your personal allowance is simple. If you file a self-assessment tax return, you will automatically receive your tax-free personal allowance.

Is there an easier way to file?

If you need to file a tax return, GoSimpleTax is here to make things unbelievably simple. Forget about long-winded form-filling and unwelcome phone calls with HMRC. Simply enter the details of your income and expenses and we’ll create your tax return for you and submit it online directly to HMRC. 

Access GoSimpleTax and discover a new free way of filing your return (HMRC approved), know what expenses will help you lower your tax bill and keep all your records online, safe & sound. Ready to file with one click. Start your free trial today!

Do I need an accountant to do my tax return?

When you realise you have to submit a tax return, you’ll have a lot of questions. ‘When is it due?’ and ‘What do I include?’ will probably be on your list. The one at the very top of it will likely be, ‘Do I need an accountant for a watertight tax return?’.

Some people undertake the DIY method, but doing your taxes for the first time can be scary. Here, we take a look at the benefits and drawbacks of outsourcing this task to an accountant. With the advent of mobile tax software, you may want to avoid them altogether…

WHAT IS A TAX RETURN ACCOUNTANT?

An accountant does many tasks for the taxpayer, and the tax return is one of the biggest – they will file it for you on an annual basis. Other duties include:

  • Keeping on top of your books
  • Claiming expenses
  • Calculating the tax owed
  • Finding savings to reduce your tax liability

HOW MUCH DOES A TAX RETURN ACCOUNTANT COST?

As with any service, a low cost is unlikely to get you great value for money. How much you should pay for a tax return accountant will depend on the amount of work they do for you, but you can easily pay up to £500 for the service described above.

You might find that some quotes are fixed and offer you more services than you require. Additionally, the cost may differ according to the type of tax return you need, and there are specific requirements related to your circumstances too – a general self-employed tax return will be different to that of a sole trader who also has a job or rental income, for example.

DO I NEED AN ACCOUNTANT?

No – GoSimpleTax allows you to easily stay on top of your taxes without the use of an accountant. Our no-jargon tax return software helps you understand and learn how to do your own Self Assessment tax return in minutes, just like an expert.

GoSimpleTax keeps things super simple and enables you to discover tax savings you didn’t even know existed. Just ask Liam, one of our users – he was able to reduce his tax liability by claiming for homeworking costs.

Whether you have a good grasp on your tax savings or you’re clueless when it comes to tax, GoSimpleTax will make sense of everything for you. It means you’ll potentially save hundreds of pounds in accounting fees, whilst still fulfilling your tax obligations and maximising your take-home pay. 

SUBMIT YOUR SELF-EMPLOYED TAX RETURN WITH GOSIMPLETAX

Tax return software is about three things: accuracy, convenience, and zero confusion.

Our Self Assessment software gives you full visibility over your finances. You can see everything in real time and from any device, including your tax liability. It also provides you with tax-saving suggestions by revealing deductible items that will automatically save you money.

‘Do I need an accountant to do my tax return?’ Not with Self Assessment software. GoSimpleTax allows anyone to be a tax expert. Find out for yourself by signing up for our free trial. You can use it to start calculating your tax bill straight away – no credit card required.

Do I Have To Pay Tax As An Online Seller? Guidelines And Boundaries

HMRC believe that, while it is perfectly okay to sell online, individuals often breach boundaries where they are making what constitutes a ‘business profit’. In this case, they may owe tax on profit made through selling on sites like eBay or Depop – and HMRC expects you to disclose such information in your annual Self Assessment return.

Declaring extra income to HMRC can be frustrating if you aren’t confident where you stand. But attempting to operate as an online seller and covering up what could be defined as trade can be potentially devastating for your finances.

That’s why here we’ve provided guidance on paying taxes as an online seller.

Do I need to pay taxes if I’m on online seller?

In 2016, the Finance Act empowered HMRC with ‘snooping’ authority to compile information from internet selling sites on ‘self-employed’ individuals who aren’t declaring income. There are certain elements to online selling that the government considers before defining something as a trade. They are:

  • Intention to make a profit as opposed to selling for fun or raise small emergency funds
  • Repetition of similar transactions over a short period of time
  • Money is borrowed to buy an item intended for sale, only to be repaid once the transaction has cleared
  • Inability to prove the items sold gave you a ‘pride of possession’ before being listed
  • The item is sold at a fixed price in a similar fashion to retailers
  • Limited time between purchase and selling, bringing into question the ownership of the seller
  • Modification of items in order to sell them for a greater profit.

For those still asking, “do you have to pay taxes on an online business?”, yes – unless you feel that you aren’t necessarily breaching the above considerations.

How much can you sell on eBay before you have to pay taxes?

HMRC does not want to tax those just hoping to make a small amount on the side. In fact, in 2017, the government agreed to a trading allowance that gave sellers the freedom to earn up to £1,000 in sales without paying anything in tax. The aim was to simplify the tax system and to help the UK “become leaders in the digital and sharing economy”.

It’s not just Ebay sellers that need to be aware of the potential tax trap, Depop, for instance, is a fast-growing community of young sellers that are making a living out of second-hand fashion. There are entrepreneurs earning thousands on the platform, unaware that they may have to pay tax as a sole trader. Gumtree and Etsy sellers are similarly affected by taxes when you sell things online – all being recognised as platforms where sellers are able to evade paying tax, and are therefore in HMRC’s firing line.

What are the consequences of not disclosing online income?

In the more severe cases, online tax evasion could result in prison – as was the case with a user in 2014 who failed to declare their eBay income. As HMRC has the authority to access PayPal information and request extensive details from online auctioning sites, it’s unlikely that such schemes will remain hidden for the foreseeable future. In 2016, approximately 870,000 people failed to submit a Self Assessment return with some cases having noticeably small amounts of income from online sales. This resulted in huge fines for the sellers, with HMRC predicting an increase for years to come.

Thankfully, completing a Self Assessment tax return has never been so straightforward. With GoSimpleTax software, you can see clearly what you need to disclose and how to avoid HMRC penalties. Our online and telephone support can guide you through the Self Assessment process so that it is accurate and transparent.

Interested? Trial our 14-day demo to see how you can streamline your accounts.

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