Do I need to pay tax on my income from Airbnb?

What tax do i need to pay?
What tax do i need to pay?

Hotel Tax

In the UK there is currently no hotel occupancy tax and to my knowledge no intention to introduce one.

VAT 

VAT is payable on Airbnb’s service fee (collected by Airbnb at the time of booking so nothing for you to do here) but no VAT is currently chargeable on rent in the UK. If such a time comes the government decides that money earned from Airbnb is no longer rent but a service fee then VAT may become payable.

You will need to pay tax on your airbnb income
You will need to pay tax on your airbnb income

Income Tax

Income tax is payable on any earnings in the UK. There are very few instances where income tax is not payable on any form of earnings in most countries. You are kidding yourself if you think that profits earned from renting out rooms or anything else is not liable for some form of tax. This is just the world we live in. You pay income tax at your marginal rate (this means on top of any other income you earn for example your job). So if your already earning £40,000 a year from your employment then you could be paying income tax at 40% or more on your Airbnb income.

The Rent a Room Scheme

The Rent a Room Scheme is a UK tax free allowance when you rent a room in your house to a third party. This is applicable to ‘Shared room’ listings but no to ‘Entire place’ listings on Airbnb (that is unless is it usually your main home).

The Rent a Room Scheme lets you earn a tax free allowance of £4,250 per year. So if you earn less that £4,250 for your Airbnb lettings portfolio then you are in the clear and owe nothing.

If you earn more that £4,250 from your Airbnb listings then your going to want to start claiming some deductions to bring your assessable income down.

The government has recently announced the intention to increase the rent and rooms scheme allowance to £7500 from April 2016.

Tax Deductions

1. A Wear and tear allowance 10% of rent (Soon to abolished in April 2016)

2. Other Tax Deductable costs incurred from running your Airbnb listing might be:

  • accountants’ fees
  • buildings and contents insurance
  • interest on property loans (for example your mortgage)
  • maintenance and repairs to the property (but not improvements)
  • utility bills, like gas, water and electricity
  • rent, ground rent, service charges
  • Council Tax
  • services you pay for, like cleaning or gardening
  • other direct costs of letting the property, like phone calls, stationery and advertising

Of course you can hire your Auntie Doreen to be your cleaner/receptionist/accountant and pay her a tidy sum for a hours work and claim that on your expenses too.

Apportioning your income and expenses

If you are a live-in host then your going to need a apportion some of your expenses (for example your mortgage interest) depending on what percentage of the house is yours exclusively and what percentage was used by your guests. The generally acceptable method is by square footage of the property.

Capital gains tax

Theoretically you could also be liable for future capital gains tax if you are taking in more than one lodger at a time – Private Residence Relief and Letting Relief.

 

88 comments On Do I need to pay tax on my income from Airbnb?

  • Thank you for this as we are finding navigating the tax issue from airbnb earning very confusing! I was wondering if the same rules apply if we are tenants and if we can offset the rent we pay each month as well?

    • I would think it would make sense that you could claim your rent as a tax deduction in the same way a business would do if it was leasing a premises. The issue is Airbnb is such a new concept that the law simply hasn’t caught up with what is happening in the real world.

  • Hi

    Thanks for this. You have answered alot of questions that I could not find answers to elsewhere.

    One thing I am still confused about is the ‘Rent a Room’ scheme.
    Above you say “This is applicable to ‘Shared room’ listings but not to ‘Entire place’ listings on Airbnb (that is unless is it usually your main home).”

    When we rent our house out on Airbnb we usually rent the ‘entire’ house and move in with my parents for a couple of days. The house we rent out is our main home. Does this mean we are still able to take advantage of the Rent a Room sceme?
    Thanks O

  • Silly question but when we’re talking about earnings ‘per year’ does this refer to the tax year? Or does it refer to Dec – January which is how AirBnb displays a host’s earnings on its website?

    Many thanks.

  • Does anyone know if there is a link to a yougov site where this is made explicit?

  • Like Ollie, I rent my main home as “Entire Place” from time to time for short periods whilst I am out of town. I’m not sure HMRC will agree that the Rent a Room scheme applies in this case. Their helpsheet states that the scheme does not apply “if the accommodation is:..•the whole of your home, rather than a part of it”

    https://www.gov.uk/government/publications/rent-a-room-for-traders-hs223-self-assessment-helpsheet/hs223-rent-a-room-for-traders-2015

    • Thanks Sam thats a good spot. I agree your right but such a small detail could surely go passed unnoticed. Plus I assume since many of your personal items are in the property and you haven’t exactly moved out I think you could easily get away with this.

      • Hi All, hi Sam,

        I actually noted the same and I do have the same issue. I live in my flat (500 squared feet/1 bedroom) but, because I travel a lot for work, I rent it out the whole place.

        Richsaint,
        how do you think we could get away with it?

        thanks,
        M

        • If the property is your main residence and contains your personal items and for all intensive purposes is your main address then there is nothing to prove – it’s your place. Some countries like Australia allow you to live away from your main residence for 5 years before you can no longer legally claim as your main residence.

  • Hello good night!great post,but,whats about ifyou rent your property in spain but you receive the money in my british account???
    I live in london and i got my apartment free most of the year,i started to renting out abd via paypal receiving the money in uk? The same rules apply?

    • If you were a Spanish citizen living pretty much all your life in Spain with no real connection to the UK then perhaps you would not liable of any UK tax. Proving that you have little real connection to the UK is difficult if you are British citizen, your family live in UK, you have British bank accounts, and basically have not lost connection to the UK then you should expect HMRC to consider you a UK tax payer. If your small enough fish to fly under the radar and spend your money abroad then I think you should be ok.

  • Hi Rich – if I moved out of my property because and Airbnb person moved in, and I rented out another property to put a roof on my head, what are your thoughts on the tax implications here? Can I deduct the entire rental expense of the other property against the income I’m making from Airbnb?

  • So basically, what chances are that I get caught if I just don’t pay taxes on this? Is airbnb going to send my details to HMRC?

  • Hi Rich!

    First of all, I really enjoy your blog, it has been extremely useful! I just have a quick question if you have a second.

    Me and my partner, both full time, have rented our flat that we currently live in the last year when we were on holidays so we manage to make gross earnings of about £2100.

    From what I have gathered we fall under the “rent a room” scheme so as soon as we don’t pass the scheme threshold (currently £4,250) and we live in the place, you don’t need to do anything right?

    Thanks!

    Tomas

    • You are correct on this Tomas. Since you primarily live in the property (any reasonable person would say you do) and the amount of income is under the threshold you needn’t declare anything. Good luck and keep airbnb hosting 🙂

  • We let out the bottom floor of our own home for short breaks – through Airbnb. My husband and I see it as joint income (just started in April) but is it best for just one of us to declare it through tax? We are both retired with work pensions. Can we put costs of welcome packs against our ‘profit’ and could I ‘pay’ my husband to do the cleaning between lets?

    • You can certainly deduct direct costs (such as welcome packs, cleaning, other related expenses) from your airbnb income. Revenue – expenses = Profit. As long as the expense incurred flows directly from the revenue you produce it is generally deductible. Expenses that you would incur anyway if there was no guests such as say your council tax would never be deductible. Paying your husband to do the cleaning is possible if the cost is reasonable but be aware he would then have to declare that income in his tax return. It may not make you any better off. If the house is in joint names then you really should be both declaring the income (half each).

  • Hello Rich

    I referred to this site some time ago and having now engaged with HMRC on this very topic I think you should correct your position on rent a room.

    The idea that the allowance can be combined with deductable expenses has been debunked quite firmly. This from the horse’s mouth:
    ——————
    The rent-a-room scheme provides two ways to work out the tax. You can choose which of the following two methods is best for you.

    Method A:
    paying tax on the profit made from letting worked out in the normal way for a rental business (that is, rents received less expenses), however for Rent a Room this must be in proportion to the room let and so I would expect the expenses to be minimal.

    or

    Method B:
    paying tax on the gross amount of receipts (including receipts for any
    related services provided) less the £4,250 exemption limit. This amount is to allow for any expenditure and so under this method no further expenses can be claimed.

    ——————

    I urge you to update / clarify your advice as the highest ranking result for a search on this topic. I’d also be careful re the likelihood of HMRC gaining access to the airbnb records. They are able to claim taxes going back 6 years, a quick call to the airbnb api and tens of thousands of people would face requests for additional tax. I’d say it is very likely that they will make that move as the likely revenue is substantial. It’s happening alreday in Ireland http://www.telegraph.co.uk/finance/personalfinance/tax/11796861/Are-shock-tax-bills-on-the-way-for-British-Airbnb-landlords.html

    Take it from me they are quite determined.

  • Hello,

    I have two questions.

    – I am renting a room on Airbnb in a house where I do not technically live. How will I pay taxes? It is not an entire room. The landlord is ok with lodging people but I am not on the contract, as I only administrate the Airbnb. The whole flat is under my friend name, who is renting her room as well from time to time. Will I have any problem when claiming my taxes if I am not on the contract? And if I ask the landlord to put me on the contract, which I can do, is it considered as renting a part of a house where I live or I don’t live? My main house is next door and what are the differences?

    – What about Council tax? We are paying a single occupancy Council tax and no one else lives permanently there. I rang the Council and nobody knows what to tell me…

    Thank you so much

    • This is very complicated. Strictly speaking you do not own the property or have any legal right to it so you are not legally entitled to any of the money from this transaction. Therefore you do not need to pay tax on it. Your friend is the one liable to tax. Your friend can claim the rent-a-room allowance and therefore pay no tax. If there is only one permanent occupant of the house then it should qualify for single occupancy council tax.

  • Hi Rich,

    I´m a self employed who lives in Scotland and this summer I had permission from my landlord to rsub-rent my flat on airbnb while I was on holiday (only for the month I was away). I made around 2,300 pounds profit. I rented the whole house (1bedroom) but this is the place where I primarily live.
    -Do I have to pay any income tax?
    -Am I applied for the “Rent a room” scheme?

    Many thanks in advanced for your help.
    Regards,

    • Well done this is exactly what Airbnb is good for. Yes you should be paying tax on any income earned in this way but you are covered under the Rent a Room scheme as this is your main home 🙂

  • Hi Rich,
    Thank you for your blog. It is very helpful. I have a question, I’m Polish , I’m self employed as a performer , and from many years I live and pay all my taxes in the UK. I have an empty one bedroom flat in Poland which I would like to rent on Airbnb . If the money goes to my British bank account, can I pay tax from that service in the UK ? When I do my tax return, do I have to just add the emount of money I earned from Airbnb , to the rest of money I earn from acting and pay one tax from all of it? Can I use the costs I pay for water, rubish , electricity as costs of self employment then? All the best. D

    • Hi D, I am not familiar with the Polish tax code (and any double transaction treaties the UK has with Poland) but you will be liable for tax in the UK but you should not be paying tax twice. So if you have already paid tax on that income in Poland then you would not usually pay additional tax in the UK unless the UK has a much higher rate of taxation than Poland. This can be slightly complicated but for most people there will be no additional tax to pay if you have already paid tax. Yes you should be able to deduct any costs incurred in running your airbnb business from your airbnb income (electricity, water, etc). These are business costs not self employment costs in this case.

  • Hey Rich,

    Thanks a lot for this article. This might be a stupid question, but exactly how do you report your Airbnb income. Do you register as self-employed and do a self-assessment? I’ve been told that I could report this as ‘Income from Property’ but as I don’t own the property I’m not sure this makes sense. Any advice would be much appreciated!

    Thanks!

    • Hi Olly, you will need to file a self assesment tax return (usually done online these days) but as additional income not self employed. ‘Income from property’ is correct. If you lease a property you technically own it (all be it temporarily).

  • I am living in UK under work visa. I am staying in a house for a rental. I am planning to rent one of my room through airbnb. Am I legally allowed me to rent and if yes, do i need to pay any TAX?

    • Hi Vijay, you are legally allowed to rent out a property in the UK work visa or none (a bit of a grey area as to what actually constitutes work). You will need to pay tax but you can claim the rent a room allowance which will more than likely mean you won’t be paying any tax.

  • Hi Rich, nice blog, ive just started wetting my toes in the world of AirBnB hosting, now i technically dont have an income or pay tax (am a professional gambler). So would my earnings threshold from AirBnB be £4250 (Rent a room scheme) or £11k (personal allowance)?? Now i also have no mortgage so would i have any limitations on how many guests+durations i could have stay at any point (4 bedrooms)? – i heard people may run into problems with non BTL mortgages and so on…

    Thanks,

    Cristo

    • Hi Christo, in your case it’s your personal allowance that you should be using when paying tax. If you have no mortgage and your house is freehold then you should have no limitations. I would recommend looking up your local councils fire and safety rules and try to conform with them as best possible to be on the safe side.

      • Hi rich, thanks for your reply pal, that’s good news 🙂

        As it goes i have a building inspector coming round this morning. (wish me luck)

        Thanks once again, and best of luck in your endeavours.

        Cristo

  • Hi,
    Great article you have cleared a lot of things up. I was thinking of going self employed and running air bnb from my house as a sole trader. I have two spare rooms and currently unemployed. Would i only be able claim the profits of this as personal allowance if air bnb was my only income ? I’m thinking of becoming an uber driver too, or running my own tour business. Could i combine air bnb with other income as a sole trader taking me to the £11,000 threshold ?

    • All your ‘worldwide’ income is assessable for income tax no matter how many jobs you have. So yes income from airbnb and working as an Uber driver will be free of income tax up to £11,000.

  • Great post Rich. So if I pay sole occupancy council tax & only have temporary short-term airbnb guests, I won’t get into trouble? One guest stayed with me for eight months, used my address for banking etc & after he moved out, I received a letter from the council asking me to confirm I was still the sole occupant. I said yes because that guy moved out..& so I have gone back to hosting short-term temporary guests..I’m still ok to pay sole occupant-discounted council tax?

  • Hi Rich,

    I am a Hong Kong resident and own an apartment in London. It was leased out long term to one tenant in the past years and the council tax is paid by the tenant. If I decide to switch it to Airbnb, does it mean that the council tax will be responsible by us?

    The apartment is currently owning by individual and we are thinking to change it to be owned by an offshore company. Is there any tax difference?

    Based on the preference above, which tax type I should responsible apart from income tax?

    Many thanks.

    • Yes if the tenant is not paying then you pay simple as that. So yes you pay. Moving the apartment to an offshore company is getting popular with some investors but I wouldn’t be too quick to do this. You might find that the benefits of holding the property in a company are not that great and there are costs in getting it setup. To be honest using offshore company structure is really only beneficial for pooled investors rather than individuals.

  • Hi Rich

    Couldn’t find much details out there. But would I need a lettings mortgage to become a host? Also what are the implications of renting out a room if I’m on a shared ownership scheme?

    Cheers

    • Shared ownership schemes have their own rules so it’s hard for me to say without reading it but I would put my house on it that there is some rule somewhere about letting without permission of the manager of the scheme. I would say tho that it you keep it quiet you will be fine. Yes in theory you would need a buy-to-let mortgage because it would be considered a change of use of the property. However a lot of people just never tell their bank and nearly all of them get away with it.

  • We rent out our whole 8 bed home. Does the rent a room allowance apply? do we qualify? Also unclear about council tax? can we claim council tax back for occupied periods?
    Most of the deductable costs are obvious, but finally what about our deducting our accommodation costs when we vacate for guests?

    • You can claim the rent a room allowance but that means you can’t claim any deductions (presumably the income is well in excess of £8000 a year so you will want to claim expenses). Yes you can claim council tax as an expense (but not with the rent a room allowance). Your personal accommodation costs are not deductible (despite what other people might try and tell you).

  • Hi Rich,
    I own a one bedroom flat where I live most of the year. When I travel for work (normally one or two weeks a month) I list my whole place (not always I manage to rent out though).

    This is my main and only residence in the UK ( I do not own any other property).

    Am I entitled to use the Rent-a-room scheme, i.e. not do the tax return if i keep my earnings below 7.5k per tax year?

    • Yes you are defiantly entitled to use the rent-a-room scheme. If its your primary residence and you for example pay council tax in your own name and have all your bank details registers at that address etc. then it would be impossible to prove otherwise.

  • Hi Rich,

    Great site for UK hosts, there seems to be very little “specific” information about this for the UK. I think my position is oddly strong and I’m really not sure what to make of the tax implications.

    I will be in ownership of a terrace house in 1 month (owned outright, no mortgage). It will be my sole UK address which I will pay council tax, and register myself under for banking etc. I do not have an income in the UK at all as I work and live abroad and visit the UK for about 1-2 months per year. For those visits I intend to block off these visiting dates and make personal use of my house at these times. A good friend will act as the communications host and manage the cleaning, I intend to split the outcome through Airbnb to her while I personally pay for the overheads (Council Tax + £120).

    What confuses me is where I stand in regards to self assessment. Will I be able to claim a tax reduction on the rent a room policy, will I be able to claim the expenses. I’m really lost and I’m hard pressed in finding a tax adviser who is experienced here.

    • Right so this is your primary address in the UK so thats good. You can claim the rent-a-room allowance or you can claim expenses. It’s one or the other. It depends on how much you are getting which is best for you (i’m thinking you will be claiming expenses if you have additional costs such as cleaning). The person you are employing is an expense. It’s not a joint effort. That person is essentially working for you because you own the property.

    • Hi Andy,
      I saw your post (Jan 12, 2017) on an AirBNB host blog and wondered if I might ask a question?

      I’m in the same position as you. I have a mortgage free house in the UK (Scotland), pay council tax, registered for banking, only UK address (although I own property overseas). You ask about claiming rent a room relief or expenses, and I was wondering the same thing, but I don’t have any other UK income and don’t file a tax return in the UK.

      Are you in the same position? Did you, in the end, claim rent a room relief/expenses without filing a UK tax return?

      Many thanks,
      David

  • Hi Rich,
    We are thinking to rent a flat room by room on Abb where we now live as tenants with no ufficial approval from the landlord. How can I declare the income from the rooms?
    Also the money would be going into a joint account. Are both persons on the account equally responsible?would be than the case to split the total by the account holders?

  • Hi, I live in a small property where I officially don’t own it but a parent officially owns it and I give a rent payment to them each month, would I be able to rent the property on airbnb with the permission of the owner (my parent).Would I be able to collect the income on behalf of my parent.

    • Presumably you don’t have a lease agreement with the parent? If you do have a lease agreement then yes you can list on airbnb and collect the rent in your own name. If no lease exists then it’s really the owner of the property who is listing on airbnb and the money earned will technically belong to them.

  • Hi Rich, I’m renting out my campervan in Portugal. Its is actually like a car rental, but airbnb advert. Would I declare that as a entire space which it is or a shared room, because i use it myself as well. How would I declare it? Does it make any difference to get the money on my german account or my Portuguese bank. I live in Portugal and the van is registered on my name. Thanks. U are an expert 🙂

    • If you will not be present during the guests stay and they have full use of the entire caravan then it is a ‘Entire Space’. It could make some difference which bank account you use if you think one tax regime is stricter than the other (which government keeps a closer check on it’s citizens?). But there may be no real difference which account you use as you are (usually) always taxed on your ‘worldwide’ earnings and not just within that country. But I suggest for simplicity you might want to keep all earnings within the country they are earned in. In this case Portugal.

  • Hi Rich. I am thinking of airbnbing a granny annex attached to my main residence. Currently I am not paying council tax for the annex as my mum and dad have now passed away and I am using the council tax exemption for granny annex’s. i am just about to retire and will have a pension roughly the amount of the personal allowance. Firstly would the rent a room allowance cover the annex as its an annex to my main house ( although its attached and has an internal door). Secondly would the rent a room tax allowance be shared by myself and partner as both our names are on the deeds…

    • Yes you would have to share the rent-a-room allowance in then sense that you both cannot claim the full allowance. It it acceptable for one of you to claim the full amount and the other zero for example. As I understand it yes it would be ok to claim the rent-a-room allowance for the granny annex as it is attached and is classified as a granny annex (you already got the council tax exemption for it so I see no further proof needed).

  • We are limited registered company started while ago
    We always traded as LTD
    My financial year is 1st February to end of January
    All income is from Airbnb website
    This type of income is holiday lettings, we are not receiving rents from guests. We rent properties from private landlords and other limited companies we sign contracts (lease) with them and pay fixed rate, fixed rent (they are not adding any vat to they rent)
    We advertise on Airbnb for example for £ 30 per day per room + £ 15 cleaning charge for stay (regardless of days spend their £ 15 is fixed cleaning charge for that room),
    Customer pay for 10 days stay £ 315 to Airbnb and Airbnb charges. Airbnb is charging customer another (separate fee) possibly 5-6 % + vat.
    We are receiving £ 315 – 3.5 %.

    3,5 % is Airbnb charge (3% is their cut and 0.5% is vat).
    So, £ 315 – 3.5% (£ 11.025) = £ 303 that is our turnover for that booking.

    Those contracts are usually 12 months’ contract.

    Turnover is over per year 200.000

    120.000 is rent we pay to landlord, our expenses are following
    Stuff /wages including taxes nin 30.000-35..000 per year
    We pay bills for all properties all utility bills (council tax, water, gas, electricity, internet) we also pay refurbishment cost materials and labour.
    Utility Bills 20.000-25.000 per year
    Our travel costs are 3.000 per year
    We pay also for car insurances, road taxes, mot etc. around 1000 per year.
    Rest we invest towards refurbishments,
    Also, we buy cars / vans / scooters for employees.
    Also, our investment is security deposit that we pay to our landlords. So, for example we pay landlords
    Rent £ 2000
    Deposit £ 2000
    However, deposit we are not getting back until contract ends which is after 12 months, most of time 90 % we keep landlords longer and sign another contract with higher rental costs.

    do we have to be VAT5 REGISTERED and if yes how it works with vat input/out , what we can deduct ?

    Regards

  • Hi Rich, excellent forum, thanks so much for this! I started to rent my whole flat out on air B and B, and stayed with my partner whilst I was doing so – however, it’s been so successful that I’m earning approx £2k a month from it, which is fab, but the tax issues confuse me – what would be your advice/suggestions? I’m in full time employment and for all intents and purposes the air B and B flat is my main residence – all the utilities etc remain in my name and I stay at my partners when it’s occupied. Bit of a mine field! Guessing the rent a room scheme could apply? Thanks in advance, chris

    • Hi Chris, yes the rent-a-room scheme does apply to you as it is your main residence. Good work on getting those bookings you must be doing something right:)
      You are liable for income tax on the amount you are earning from airbnb above the rent-a-room allowance. This will be taxed at your marginal rate. My advice if your planning on telling HMRC about your extra income is to reduce your employment income by way of Salary Sacrifice (put it in your pension the benefits are excellent).

  • Hi, I’ve been looking at the Rent a Room allowance which is all well and good, but I have another question about how best to set up our hosting. Would we be better off to do this as a business for tax purposes? I’m PAYE and my partner is self employed. I can see it getting rather messy when it comes to tax returns. We don’t expect to make a profit, not to start with anyway, so the guidance indicates that we are best not to use the scheme, but to claim standard profit minus costs for tax return purposes. This is all fine, but if we don’t set up as a business and keep it separate, are we going to end up getting confused?! Hope you can advise.

    • It depends on how far your expecting to run with airbnb. If you think it’s going to be a big winner then you should form a LTD company. But in most cases airbnb is a bit of extra income for maybe a few years and you should basically take the money and run so to speak. Keep things as they are and at the end of the year decide what your going to do.

  • Hi
    Myself and my partner own our house and rent out our room through airbnb. It is not used every night. We both work full time jobs. Do we have to pay tax for at the moment or are we covered under the rent a room scheme? Can you confirm how much we can earn before paying tax?
    Thanks

    • Yes you can claim the rent-a-room allowance. If you do not make over £7500 in any tax year then you have zero tax to pay. Any amounts over £7500 will be taxed at your highest income tax rate (as it’s on top of your work income).

  • Hi,

    Im just starting out on AirBnB and have a little (<30m2) self contained outbuilding on my property im going to rent out. As it is part of my property, but not physically attached to my house does that mean i can't use the rent-a-room scheme? I guess a lot of other people will be in this boat who rent out sheds, bothys and various other garden cabins.

    thanks

  • We are in the UK and are currently renting out a room over our (detached) garage, through Airbnb, It has its own ensuite shower and small kitchenette but no cooking facilities. We are unsure whether this comes under the rent a room scheme and whether we should be paying separate council tax for what, I guess could be deemed to be an annexe. Any advise appreciated.

    • Anyone can claim a rent-a-room allowance (even a hotel) so yes you can. If it’s not a separate address then it doesn’t pay council tax in it’s own right. But you may find yourself in a higher tax band due to the overall value. If your really worried about it you can ask for the council to send a valuer to check your in the right band.

  • Hi Rich
    Can you advise on my situation? I have converted barn on the same site (and within the one planning unit) as my main house. Not physically connected, not a separate postal address, but with separate fuel tank, electric meter and water meter. The barn was originally converted as incidental accommodation to the house for a granny annexe and then later has a change of use to a holiday let which entitles it to a 50% council tax discount. Would rental earnings from the barn be under the rent a room scheme or subject to tax. I am a 40% tax payer.

  • I have been doing airbnb for around 2 years, which I have thoroughly enjoyed. I declare all income on my annual tax return though have never paid tax as I do not take enough money (around £3000 in 2016 and around £1200 so far this year). This has all been confirmed by my accountant who completes my tax return. I have one spare bedroom that I let out for odd nights and having counted up the nights I had guests in 2016-17 this comes to 76. So far, so good, but I have recently been asked by a neighbour if I should be registered as a business as I am running a bed & breakfast so surely should pay business rates as well as my council tax. This is a great shock to me and I am wondering whether to contact my local council about this or just do nothing. If I do have to pay business rates then I will need to stop doing airbnb as it will not be financially viable. I would be grateful for any clarity you can offer on this issue.

    • This is a grey area. It has been suggested that some councils may enforce a rule requiring you to apply for a bed and breakfast licence. However the government has signalled that it want’s to promote the “sharing economy” and has indicated that it is against such rules. So the point is that if the council doesn’t ask you to do so they don’t. Lot’s of people run a business from home and don’t pay business rates so your neighbour has no idea. Also you can’t pay both council tax AND business rates thats silly.

  • Hi
    If you earn under £7500 on renting your home on Airbnb do you have to declare it on your tax return ?

  • Hi,
    I’d like to start letting one room in my house.
    Me and my partner work full time jobs and lets say our income is 20k per annum per person.
    We probably would only earn under 7500 per year on Air B&B anyways so wouldn’t have to tax it but how is this income relating to our main job income? Isn’t it a situation when we could get our tax codes changed or something?

  • Hi, Rich
    Your blog is really helpful but I am still a bit confused. I would like to ask you some questions. I rented two bedrooms flat (contract under my name) & sharing my friend. But my friend will be moved out soon due to her work plan. I am thinking of using Airbnb to rent out my friend’s room & cover the some of my rent. Can I legally do that?
    If I would earn more than £7500 per year from airbnb then I would believe that I have to pay the tax for that. But the airbnb income is not my profit, it’s a rent.(I just cover the other room rent from airbnb income) if this case then, can I claim a tax deduction of rent charge so that I don’t need to pay the tax? It would be really helpful if you can give me the answer for that.
    Thank you so much in advance.

    • Yes you can legally do that. But the owner of the property may refuse permission. Rent is income so yes any income above the rent-a-room allowance is taxable. This is the downside of the rent-a-room allowance in that you can’t claim the rent your paying as an expense. My advice would be to only earn £7500 a year out of it to keep things simple. Or get a regular patron who is willing to pay cash.

  • Hello, I have a property in Morocco and I live in London. The money I receive from the bookings comes into my account here in the UK. Do I have to declare the money with HRMC? really confused as I can’t find any information on this.

    • Right ok this is very important and is never often explained very well. HMRC always taxes you on your WORLDWIDE income. So if you earn money abroad it is defiantly considered to be part of your income no matter which bank account it’s paid into. So yes you should pay tax. The exception is those with a ‘non-domicile’ status in the UK. This is why bank accounts in places like Switzerland are popular not because they are tax free but because they are ‘secret’. Money earned in tax havens like the isle of man etc are only tax free until the money is moved into the UK.My advice would be to pay the money into a foreign based bank account and never to bring it into the uk and hope HMRC never finds out about it.

  • Hello Rich
    I am hoping you can help me out.
    I’m new to Airbnb (this tax year). I decided to fully rent out my one bedroom apartment when I am away travelling with work or staying with friends to supplement my income as I’ve went part time for health reasons. This is my only property with my personal belongings where I pay council tax etc.
    My salary from my main employer before overtime keeps me under the 11.5K threshold of paying tax.
    My Airbnb property is in a sleepy seaside town so I’ve earned Around 3.5K this year and I think that may be my bookings until Easter which may take it to 4K for this tax year.
    This will take me over the 11.5K threshold and I don’t want to be caught short with the tax office.
    Am I right in saying I should be doing a self assessment or does my propoerty fall under the rent a room scheme?
    Also when I am travelling I pay someone to check my guests in and out as a meet and greet service, pay a cleaner and buy items purposely for the guests stay. Are these expenses if I am to pay tax I can claim for?
    Thank you in advance for any advice you can offer

    • Yes you should be claiming the rent-a-room allowance. There is no need to do self assessment or tell HMRC. If your using the rent-a-room scheme then you cannot claim expenses such as cleaning. You have noting to worry about this scheme is designed for people in your situation.

  • Hi, I have just brought a small studio apartment which I use when I’m at work during the week, I am paying council tax on it and have not listed it as my main address. I am looking to airbnb it weekends and a few weeks during the year whilst I’m on holiday, couple of things: 1. should I change it to my main residence? how does this help with tax? 2. should I list it as the entire place? or does increase my tax liability? 3. what are the tax implications? as I believe the law has just changed? 4. my wife is a non tax payer, would it be better if the airbnb side was in her name?

    Thanks!

    • 1. I think in your case there is no need to claim it as a main residence as I see no real advantage. Unless you expect this property to have huge capital gain in excess of your current main residence. 2. If you the guest has access to the whole property then yes it’s a Entire Place. 3. You can claim the rent-a-room allowance but will have to pay income tax on amounts received above the threshold (or just don’t tell anyone). 4. This is a good idea in theory but would mean transferring the studio into her name only which means paying stamp duty etc. I would however have the money earned from airbnb into her bank account only to stay low profile.

  • Hello Rich,

    I’ve recently started renting my house out on Airbnb and while I stay in the guesthouse (detached). When I do not have guests staying I quite often move back into the house etc. Although I am not renting a room out would I still be able to use the rent a room scheme as I am still living on the property?

    Thanks for your help in advance.

    • The rent-a-room scheme is defiantly for people like you. It’s not aimed at those who let out their properties on airbnb full time. It basically exists for those people who just want to make a few pounds while they are not using their house or whatever. Yes you should definitely claim the rent-a-room allowance.

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