Tax Implications on Airbnb Income

by Vidit Agarwal Marketing Director

Do you have a spare room or property and you are willing to earn some income by renting them to people looking for accommodation? Airbnb is an online marketplace and popular accommodation sharing platform which brings together people who want to rent out their property and the people how are looking for a place to stay in that locale around the world. Airbnb is a private global company that charge commission from Airbnb host and guest on every booking.

Airbnb Income- Taxable or Non-taxable?

Airbnb landlords renting out their property and earning income from hosting will be liable to pay tax on them. Yes, Airbnb host will also subject to some tax reliefs. Airbnb income is considered same as other taxable income in UK. You may need to inform HMRC about your Airbnb income if you earn more than the threshold.

Tax and Relief implications on Airbnb income depends on how much rental income is earned and what you are renting out; whether you renting out rooms within the main residence or buy-to-let property:

Rent-a-Room Scheme

If you are letting out one or more furnished room to Airbnb guest within your main residence/home i.e. where you live, you may qualify for rent-a-room scheme which means you’ll be entitled to get tax-free personal allowance of £7,500 for every year. Any Airbnb income over this threshold will be subject to tax. If there is a business motive behind letting the property, rent-a -room scheme won’t be applicable.

Buy-to-let Property

If you are hosting on Airbnb and renting out accommodation that is not your main residence, you will not be entitled to rent-a-room scheme as a result you won’t be able to take advantage of tax-free allowance of £7,500 per year. You will be taxed similar to other business owners.

You don’t need to worry about VAT if your Airbnb rental income is not more than VAT threshold £85,000, if it is then 20% VAT is charged on rent.

Furniture Holiday Letting & Capital Gain Tax Reliefs

If you renting out property or accommodation that is not part of your main residence and qualify for Furniture Holiday Letting (FHL), such Airbnb landlords take advantage of tax reliefs and reduce their tax liability;

If the property qualifies as FHL, landlords do not need to worry about dreadful 24 section interest relief restriction.
You’ll be eligible for Capital allowance on furniture, fittings, equipment
Entrepreneurs’ relief will reduce your capital gain tax from 28% to 10% at the time of property sale
Rollover Relief allows to pay capital gain tax on selling of your property later, if you are selling your current Airbnb property and buying another Airbnb property.