WellTax Blog

What do you need to do when using Airbnb

July 24, 2017

Airbnb is an online community created in 2008 that allows you to rent a cheaper accommodation than traditional hotels and gives those who have a household with certain characteristics, like a spare room or an adjacent living space, a chance to offer strangers or tourists a rented accommodation for short periods.

The operation methods are similar to the more traditional internet sites that offer a housing search service. The peculiarity of this service is that it gives special importance to personal relationships between the tenant and the owner of the accommodation, as the latter is required to provide personal information other than the ones relating to the housing arrangements.

The cost of accommodation on this website includes the price of accommodation and the commission recognised to the portal. It varies between 5% and 15% based on the total amount spent. For those who offer accommodation, the commission is instead fixed at 3%, but it could change between 3% and 5%.

After almost ten years of activity, Airbnb has reached very high usage levels, so that some local governments, such as Rome, Milan and Paris have reached agreements with the company. However, other municipalities like Berlin have been hostile to the platform of sharing: starting from May 1st, 2016, a regulation in the German city that prohibits renting an apartment or a room in the absence of a specific license, through services such as Airbnb, became effective. The fine for the transgressors is €100,000, such high amount pushed many Berlin hosts to take off their listing from the site to avoid running into controls and sanctions. According to some newspapers, if the example of Berlin was followed by other big cities, the measure could mark the end of this service. Unless, as was the case in San Francisco, a referendum is indicted to decide the fate of housing websites like Airbnb. The result was in favour of the above mentioned platform.

In regards to the hosting business in London, the scenario is a little bit more complicated.

Short term rentals in London before 2015 were subject to restrictions following the “material Change of use “of residential premises that were used as temporary rental accommodation and for which a specific authorization was required.

In 2015, with the Deregulation Law, the government introduced an exception to this restriction. The exception allows residential to be used for “temporary sleeping accommodation” without this being considered a “change of use”, so long as the cumulative number of nights of use as the temporary sleeping accommodation does not exceed 90 nights in a calendar year.

In case the 90 nights are exceeded, in fact, the exception does not apply.

As of January 1st, 2017, Airbnb’s systems will automatically limit entire home listings in Greater London to 90 nights a year, unless the hosts confirm that they have the required permission to share their space more frequently (“Exemption Form”). You should carefully check where your building/room is located and address the issue to your local authority (Borough).

Regarding fiscal regulations, it has been calculated that in the UK, if “rent a room” facilitation is abolished, about 50,000 Airbnb affiliates will have to pay from £400 to £3,300 more per year against a yearly average gain of £3,500 in London and £2,000 in the rest of the country. From April 2017 you can apply for a “Rent a Room” facilitation only if your income is less than £7,500 and only if you do not rent other parts of the house, such as the mansard or the garage.

Real estate rental income is not considered as autonomous and therefore owners are not required to pay the National Class 2 Insurance Contributions (NICs).  However, if one plans to increase rented premises, including other places besides simple rooms, the process will go from a simple rental activity to something more complex and this will result in the payment of different tax rates based on the reference NICs.



Tax rates from April 2017

Class 2

£2.85 per week

Class 4

9% of profits between £8,164 and £45,000
2% of profits over £45,000


If a company is to be opened to manage this business, there might be several issues to face. Firstly, the premises that are going to be rented should be sold to the newly created limited liability company, thus generating an immediate increase in capital and consequently an increase in the taxes that must be paid.

If the taxes on capital gains due to the transfer are accepted and the business is making profits, these will be taxable at a 19% tax rate (Corporation Tax).

Subsequently, the withdrawal of the funds from the company must be made by means of remuneration or dividend. The dividend route is the most efficient taxpayer, but it will probably change next year. If of course, you do not need immediate funds and allow them to accumulate in the company, you can end up with the liquidation of the company and make these funds at 28% as capital gains.

All this is quite attractive if you are a taxpayer with a very high rate, but you must not ignore the administration costs involved in managing a limited liability company.



Contact us for more informations.



Silvano Ghigliani & Alessio Menna

Tags: airbnb uk, rental properties, air b and b, airbnb london, tax deductions, www airbnb, airbnb login, what is airbnb, air b, airbnb app, how does airbnb work, air bnb uk, rbnb, airb and b, airbnb italy, airbnb when do yuo pay, tax deductible expenses, airbnb busienss, airbnb taxes

Related articles

01 December, 2023

UK Autumn Statements 2023: what does it mean for individuals?

27 November, 2023

UK Autumn Statements 2023: what does it mean for businesses?

Search something