HOW MUCH TAX DO I HAVE TO PAY ON AIRBNB INCOME?
Anything above your Personal Allowance once you’ve deducted any reliefs is taxed just like other types of income. The rate of tax you’ll pay depends on which tax band you fall under – 20% for basic rate, 40% for higher rate and 45% for additional rate. These apply to England, Wales and Northern Ireland. The rates for Scotland vary.
Don’t forget about VAT, either. If your total income from Airbnb rentals exceeds the VAT threshold of £85,000, then you’ll need to add a VAT charge of 20% on the rent. You’ll need to be VAT-registered as well.
WHAT TAX RELIEF CAN I GET ON AIRBNB INCOME?
If your property is not your main home and qualifies as a furnished holiday letting, you may be entitled to several forms of Capital Gains Tax relief, including:
- 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 (basically, you save yourself from having to pay tax for the time being)
- Capital allowances for property furniture and fittings
Please note that you can’t claim back expense costs if you’re using Rent a Room relief. This may suggest you’ll minimise your tax liability more without it. You might, for example, wish to replace furnishings under the Wear and Tear Allowance instead. Always compare your estimated tax bills with different allowances and reliefs factored in to ensure you’re maximising your take-home pay – tax return software can help you here.
Additionally, HMRC has tightened up the rules of the Rent a Room scheme. You must be in the property yourself some or all of the time it is let out. This is designed to prevent people from moving out and renting their properties during a specific event (such as Wimbledon) to abuse the relief scheme.
TAKE ADVANTAGE OF TAX SOFTWARE TO MAKE AIRBNB LETTING SIMPLE
Tax software plays an important role in compliance in the gig economy. There’s a lot to wrap your head around when renting out an Airbnb property, and the rules get particularly confusing when you reach the upper echelons of the earnings scale.
Take advantage of GoSimpleTax tax software and you won’t have to worry about the complications of Airbnb rentals. With our Self Assessment software, you’ll be prompted, advised and guided when you input your earnings figures – ensuring you pay exactly what you owe and enjoy any tax relief you might be entitled to.
It’s fast, seamless and mobile. Our full service also enables you to photograph receipts, which are scanned for expenses before being added into our platform to build a real-time picture of your tax status.
But you don’t need to pay a thing to start benefiting from GoSimpleTax. Sign up for our free trial today and stay on top of all your Airbnb tax commitments.