What are my tax obligations as an Airbnb host?

What’s my Airbnb’s tax liability to HMRC?

Much like landlords who rent to tenants, Airbnb hosts also have to declare their income to HMRC, depending on the amount of money they receive from their property.  In 2020, Airbnb shared income data from 225,000 UK hosts with HMRC, meaning an increasing number of people had their earnings under the microscope.


It’s never been more important to make sure you’re following the rules when it comes to reporting your income from an Airbnb letting.


If you’re unsure what information to disclose to HMRC, we’ll explain everything you need to know.


Data sharing with HMRC

In 2020, Airbnb announced they would start sharing income data with HMRC, stating that they would report host earnings from the 2017/18 and 2018/19 tax years in their January 2019 accounts.


But that’s not all – HMRC can also enquire into tax returns for four previous tax years or even up to 20 years if they believe you’ve deliberately filed an incorrect tax return.


Now that HMRC has access to landlords’ payments and Airbnb earnings, it will be able to use its discovery powers to open up enquiries if it believes hosts haven’t been meeting their tax obligations.


Airbnb hosts have varying tax thresholds depending on how they let their property and may be required to declare any income on their tax returns.


Rent-a-room relief

One of the main reliefs available to Airbnb hosts is the rent-a-room relief. This allows individuals to earn up to £7,500 per year tax-free if they’re letting out furnished accommodation in their own home.


If more than one person benefits from the income, the limit is halved, and each person will have a tax-free rental income of £3,750 per year.


The relief is automatic and will apply if:


  • the letting is in your main home
  • you live in the UK
  • the space is for living purposes and not used as an office
  • the total rental income is under £7,500 a year.


If you meet these conditions, you won’t need to report the income on a tax return. However, the rent-a-room scheme will not apply if you run your Airbnb as an investment property.


There are two main methods for working out tax on Airbnb income when you have receipts over the relief threshold.


The first is paying tax on the profit you make from letting, calculated as any normal rental business (rent minus expenses).


The second is paying tax on the gross amount of your receipts with the exemption amount deducted.


Income tax on your Airbnb

As mentioned, if you run your Airbnb as an investment and it isn’t within your home, you won’t be able to apply for the rent-a-room scheme.


If you use a second property as your Airbnb, you’ll have to pay income tax similarly to any other landlord. You will need to report any income you receive as a host to HMRC through your self-assessment return, and anything over your £12,570 personal allowance will be taxed accordingly.


VAT on Airbnb

Like your income tax obligations, VAT will also be chargeable if you surpass the £85,000 annual turnover threshold.


When you hit this threshold or know you will reach it soon, you’ll need to register with HMRC for VAT payments. Once you’re signed up, you’ll be required to pay the VAT standard rate of 20% and file quarterly returns.


What next?

Your tax obligations to HMRC as an Airbnb host can be complex and difficult to navigate. Speaking to an expert can provide you with the insight and advice you need to ensure you’re doing everything correctly.


Contact us today if you wish to speak to a member of our tax team to discuss anything contained in this post.

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