WellTax Blog

Airbnb in the UK: tax implications

January 2, 2022

Renting out a room in your flat through Airbnb may seem like an easy way to generate new income, but you need to consider the tax implications of doing so. The Airbnb room rental market was in a slump throughout the pandemic period, but since the UK government eased restrictions, the Airbnb-generated scheme has picked up again. If you intend to invest in this type of market to generate revenue from Airbnb, various tax implications should be considered.

First of all, it must be taken into account that income from rooms rented on Airbnb must be added to other income from employment and/or self-employment and that the deadline for submitting the Tax Return is usually 31 January (or even earlier, if sent in paper form) for the tax year that runs from 6 April to 5 April of the previous year (therefore, for the fiscal year running from 6 April 2021 to 5 April 2022, the tax return must be filed by 31 January 2023). In order to take advantage of all the tax benefits, you should note that you may be eligible for “Rent a Room Relief” and may be entitled to tax relief separate from your main income if you only rent a room through Airbnb.

In fact, you are entitled to separate tax relief for renting a room, if you rent a room part of your main residence. In this case, the tax-free threshold per tax year is £7,500, while it is reduced to £3,750 if the property is shared with a partner or friend. If the amount of rent exceeds the threshold of £7,500 (or £3,750 in case the property is shared with somebody else), then there is a choice between deducting the standard threshold of £1,000 per owner or the actual costs, to calculate the taxable amount.

The principle of deducting expenses can be complex, particularly if the expenses to be deducted relate to refurbishment or interest on the mortgage. Replacing the same item is usually allowable, but with exceptions: i.e., if you replace a free-standing appliance with a built-in version. HMRC has produced a detailed guide explaining how to classify deductible expenses (available at the following link: PIM2068 – Property Income Manual – HMRC internal manual – GOV.UK (www.gov.uk)

Finally, if you decide to go into the Airbnb business, you need to consider the tax implications of providing extra services. It is essential to know that providing linen changes, cleaning for longer stays and providing meals could move you from renting out a property to running a business, which means National Insurance (NIC) and income tax may be payable.

Domenico Santomasi

Photo by Filios Sazeides on Unsplash

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