Airbnb: The tax implications

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In the latest UK200Group blog post, Lorna Sizer, Senior Manager, Personal Tax, of member firm Knill James Chartered Accountants looks at the tax implications of becoming an Airbnb host.

Airbnb is a website that offers a way of earning money from your property by renting it out temporarily. Airbnb take their fee for acting as an agent on the booking and the net payment is received by the owner. However, there is global concern amongst Airbnb hosts as to whether they are legally permitted to admit guests into their property under the terms of their tenancies. With this in mind, there are certain tax rules that hosts should be aware of.

If the Airbnb host is letting out a room in their own home, the rental income will be tax free up to £7,500 each year (i.e. £625 per month). One point to watch is that this rental income is the gross amount before any expenses including the Airbnb fee, so care needs to be taken if a room is rented out on a regular basis. Rental in excess of the £7,500 limit is taxable, without any further deduction for expenses and should be reported to HMRC.

If the host is letting out a second property, perhaps a holiday home, then the income from the second home will be taxable as normal rental income without the benefit of the £7,500 tax free amount. Instead, costs relating to the letting can be deducted from the income. There are favourable capital gains tax rules where such a letting meets the conditions to be regarded as a Furnished Holiday letting. These are primarily based around the time during which the property is available for letting and the actual periods during which it is let out on a short-term basis. However, capital allowances can be available so it is not all bad news.

All Airbnb hosts must submit their annual tax return form to HMRC giving details of the rental income, along with other income for the tax year. The form must be submitted by 31 January following the end of the tax year and any tax owing must be paid on the same date.

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