Do you know your tax liabilities for Airbnb rental income?
Airbnb has created a convenient way for people to generate extra income however, it comes with Airbnb host tax responsibilities that are mandatory.
From 2020, UK tax authorities made it clear that all income from short-term rentals via platforms like Airbnb should be declared and taxed. Failing to comply with tax obligations can lead to significant penalties. Additionally, Airbnb shared the income data of 225,000 UK hosts with HMRC, placing many hosts’ finances under the microscope. Therefore, it is essential for Airbnb hosts to remain up-to-date with the latest tax rules and regulations.
Whether you have questions around how much tax you need to pay, if you’re eligible for tax relief, or if there are any tax advantages for Airbnb hosts, we are here to guide you on what is applicable to you.
How does this affect you as an Airbnb host and what do you need to understand about your tax duties?
There are broadly three methods of deductions you can claim against your property income.
🟢Property Allowance
If your total rental income is below £1,000, you do not have to report the rental income on your UK tax return. If your property income is above £1,000 but the expenses you have incurred in relation to the property are below £1,000 you can still claim the £1,000 property allowance against the property income. This reduces your taxable profit. However, if you choose to use the £1,000 property allowance you cannot deduct any other expenses from the income.
🟠Rent-A-Room Scheme
There is a separate allowance available where you rent a room in the property in which you normally reside. If you qualify and your total rental income is below £7,500, then you do not have to report the rental income on your UK tax return. If the property is jointly owned, then the £7,500 allowance is reduced to £3,750. Like with property allowance, if your income is over the rent-a-room allowance you can still choose to reduce the total income by £7,500 (or £3,750 if let jointly) and pay tax on the difference, rather than reduce your rental income by the actual expenses incurred.
🔵Claiming actual expenses
If you do not claim either of the above allowances, you may instead reduce the rental income received by the actual expenses you incur in relation to your property rental business.
🟡Remember: You will have to declare this through HMRC’s self-assessment tax return under the UK Land & Property section and pay tax on your Airbnb income.
If any of the above concerns you or you have further questions and queries, please feel free to get in touch at tax@enhance-professional.co.uk and we would be happy to navigate you through the essentials.