Tax Guidance For Airbnb Hosts

Airbnb has quickly morphed into the go-to place for affordable holiday accommodation. Anyone with a spare room can now make money by letting someone stay in their home for a night or two – and playing host on the platform can prove to be a bit of money-spinner in the long-term.

Renting out your property when you’re not using it is a great way to make a quick buck – but there are tax rules you need to be aware of. These tariffs have tripped up more than a few Airbnb hosts over the years, and this piece provides the guidance you need to stay in the taxman’s good books.

Why do I have to pay on Airbnb income?

Everyone is entitled to earn a certain amount of money tax-free, but must pay tax on any income that exceeds their “personal allowance” (currently set at £11,850).

Airbnb earnings are not exempt. You must declare this income along with every other penny, and give the taxman a share when you tip over the £11,850 mark.

Remember that all your non-PAYE earnings must be included and submitted as part of your Self Assessment tax return.

HOW MUCH TAX DO I HAVE TO PAY ON AIRBNB INCOME?

The amount of tax you are required to pay on your Airbnb income is affected by whether the room you are renting out is in your main residence or not.

If you are letting a room out of your home, you may qualify for a tax-free allowance of £7,500 per year. If you are hosting an Airbnb listing in a separate property, you will be taxed on profits like business owners are.

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 will 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.

However, draft legislation from HMRC will be tightening up Income Tax rent a room relief. It will keep its current level of £7,500 per year, but if you rent your own home, you must be present some or all of the time that it is let out. This is aimed to prevent those that move out and rent their properties during a specific event (such as Wimbledon) from abusing the relief.

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.

Last updated 8th October 2018.

Need help preparing your tax return?

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Simply register for free with your full name and email address.

Select the income you receive and follow the hints and tips for potential tax savings.

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