HMRC has recently started to send out letters to those who might have made income from short-term property letting via websites like Airbnb, Booking.com, VRBO and Holliday Lettings.
If you're making money from short-term letting through a platform such as Airbnb, it is important to understand the taxation implications. In the UK, there are two types of income tax that can be applicable to Airbnb tax - ordinary rental income and furnished holiday income.
What is Ordinary Rental Income Airbnb?
Ordinary rental income is relevant if your Airbnb property is rented out for more than 105 days per tax year and is seen as your main source of income. This doesn`t include the time you occupied the property.
The property must be available for 210 days per year, minus the time you occupied the property.
The income you receive from Airbnb will then be taxed through the same process that applies to other types of rental income, such as when you rent a property out directly - this means it will be liable to Income Tax, Capital Gains Tax and possibly Inheritance Tax.
You can either claim property allowance which is £1,000 tax-free or deduct your costs such as mortgage interest, letting agent fees and repair costs.
When it comes to Airbnb income tax, there are certain allowances that you may be entitled to which can reduce the amount of tax you need to pay. The rent-a-room scheme is a popular one; this offers an exemption on rental income up to £7,500 per year and can help reduce your Airbnb tax liability.
What is Furnished Holiday Letting Income Airbnb?
Furnished holiday lettings are rental properties that are available for short-term lets of less than 31 days at a time - such as those offered through Airbnb.
FHLs are also eligible for certain tax reliefs, such as claiming capital allowances on furniture and equipment purchased to furnish the property. You can check the updated changes on capital gains tax on property here
If you rent out your Airbnb property as an FHL then you may be able to claim reliefs including Business Property Relief (BPR), which can offer full exemption.
Furnished holiday letting income is applicable if you rent a property out for less than 210 days per tax year, and can be viewed as a business activity. When this is the case, Airbnb's income tax falls within the rules of self-assessment, where it will be liable to Income Tax and possibly other taxes such as capital gains tax and inheritance tax.
If your property qualifies as a furnished holiday lets the advantages are that you can claim tax relief on the costs of running and repairing your property, such as mortgage interest payments, insurance premiums, repair costs and maintenance. This means you are entitled to capital allowances.
Do I have to pay tax on short-term rental income?
Unless your gross rental income is more than £1000 you don`t have to. If you have a larger income than £1000 from the short-term rental, filings and deadlines have to be kept in mind.
You need to register as a self-assessment taxpayer and inform HMRC about your Airbnb income. Rental income must be reported on a self-assessment tax return, which is due by the 31st of January each year.
Short term rental income is one of the most commonly forgotten tax claims on a self assessment tax return, find out what others you can claim in connection to short term letting incomes here
In conclusion, if you are renting out your property through Airbnb, it is important to understand the implications of Airbnb income tax and whether you qualify for any tax reliefs or allowances.
If you are concerned about Airbnb income tax, then it is advised that you speak to an accountant who can assess your individual circumstances and provide further advice on how best to proceed. This could save you money in the long run and ensure that you comply with any Airbnb tax regulations. It is important to understand Airbnb tax implications so that you can make informed decisions when it comes to renting out your property.