Hi, I’m Simon.
I’m one of the Directors of UK Landlord Tax. When I talk to Airbnb hosts, I hear the things they enjoy about what they do are usually the same things I love about being a landlord myself – finding that perfect property, putting your own mark on it and making it a great place for people to stay. What they don’t like is the complexity of tax and compliance, but that’s where we come in. If you need any help with your Airbnb let, give us a call.
Hosting on Airbnb should be fun, not a burden
We take the stress away with specialist property tax advice.
The difference between Airbnb and buy-to-let
As opposed to traditional rentals, Airbnb hosts have a fast-paced schedule, with guests coming and going throughout the year. Under a buy to let the tenant usually signs up for 6 months at a time under and Assured Shorthold Tenancy.
HMRC class letting property on portals such as Airbnb as Furnished Holiday Lets and this comes with some significant tax advantages. You must meet the following criteria:-
The property must be let for at least 105 days in the tax year
The property must be available for letting for at least 210 days in the tax year
It must not be let to the same person/organisation for more than 31 days without a break
Whatever option you decide on, you will be less stressed and more profitable overall if you have a professional property tax advisor on hand to handle your tax and financial planning. Also there is always an option to establish a career as an Airbnb property manager.
Hosting on Airbnb has many benefits
Flexibility is a major advantage of short-term letting. If you want to make renovations or even spend some time at your property in between guests’ stays, you can do so anytime you like.
Additionally, there may be higher rates than you would charge for rent depending on where your property is located. It can be highly profitable to list your property on Airbnb if it is in a high-demand area.
In addition, landlords who have been hit by the recent reductions in mortgage interest relief and lettings relief may benefit from some tax advantages.
Three specific tax reliefs stand out in particular:
The first. The full amount of mortgage interest payments is tax-deductible. Airbnb is often regarded as a business venture by lenders, so interest rates can be higher than those for traditional buy-to-let properties.
Secondly, fixtures and fittings are eligible for capital allowances from day one. This is in contrast to buy-to-let properties, where fixtures and fittings are generally only allowed as replacement costs. What constitutes a fixture and fitting is a specialist area of tax and in some cases everything from boiler systems, electrical wiring to door hinges nuts and bolts is classed as fixtures and fittings. The capital allowance claim can therefore be very substantial resulting in no income tax for in some cases up to 3 years. It definitely pays to get specialist tax advice in this area.
The third is relief for business asset disposals. In other words, if you sell your Airbnb, you may qualify to have the gain taxed at just 10%. The savings could be substantial when compared to the current capital gains tax rates of 18% or 28%. Additionally, if you own more than one Airbnb, you may be able to sell off each property separately and still claim business asset disposal relief. Beware though, this is not an automatic entitlement and HMRC have denied this tax relief in a number of cases so it is vital that you get an appraisal of your particular situation first
What are the benefits of working with a specialist?
There are a lot of tax rules that apply to property that are different from those that apply to retail businesses or personal finances, for example.
When buying or selling a property, you should consider stamp duty and capital gains tax, as well as expenses, allowances, and reliefs specific to the property.
Working with a generalist accountant is often not sufficient for getting the most out of your Airbnb property.
Having been landlords ourselves, we understand the ins and outs of property tax, and we provide straightforward, valuable advice to our clients. We’re confident that after a consultation with us you will immediately see why working with a specialist could save you £000’s.
Frequently asked questions
Is Airbnb income taxable?
In most cases, yes.
The money you make through Airbnb is considered taxable income if you host as an individual rather than a limited company.
As long as your taxable income goes over the personal allowance, which is £12,570 for each year between 2022/23 and 2025/26, you will be charged at your marginal tax rate.
Airbnb income might also be tax-free depending on your circumstances, depending on the allowances and reliefs you qualify for.
Can I deduct my Airbnb income expenses?
If you incur expenses exclusively from running your Airbnb business, you can deduct them from your income before tax.
Some examples of this might be:
- General maintenance and repairs (not improvements)
- Water rates, council tax, gas and electricity
- Tax relief for mortgage interest
- Costs of cleaning
- Accountant’s fees
- Insurance
Find out more about deducting expenses from rental income in our full guide.
Can I get tax relief on Airbnb income?
Each year, anyone who gets income from land or property can claim an allowance of £1,000 rather than claiming their actual expenses. The full £1,000 is available if you own a property jointly instead of claiming expenses against your share of gross rental income.
Those who are eligible for this and have an annual gross property income of £1,000 or less don’t have to report this income to HMRC.
You may also qualify for:
Rent-a-room schemes, allow you to deduct up to £7,500 tax-free from your gross rental income, instead of expenses, provided that you live in the dwelling while the tenant occupies it. As a result of the rent-a-room allowance, the share of expenses cannot be claimed as a deduction from gross rental income.
There are also several tax advantages associated with furnished holiday lets.
We discuss this topic in more detail in our blog post on Airbnb’s tax advantages.
How to get around Airbnb 90-day rule?
The Airbnb 90-day rule is a regulation that applies to properties in Greater London. It states that you cannot let your Airbnb property for more than 90 days per calendar year, unless you have planning permission that allows you to do so. If you’re looking for ways to “get around” this rule, it’s important to note that attempting to bypass or evade regulations is not advisable or legal. However, here are some alternatives you can consider:
1. Rent for longer periods: Instead of short-term Airbnb rentals, you could explore longer-term rentals of 6 months or more, which are not subject to the 90-day rule.
2. Furnished holiday lettings: If your property meets the criteria for a furnished holiday let, you may be eligible for certain tax advantages. However, it’s important to consult with a tax specialist to ensure compliance with regulations.
3. Explore other platforms: Consider listing your property on alternative platforms or websites that may have different regulations or restrictions.
4. Seek professional advice: It’s always a good idea to consult with a property tax advisor or legal professional who can provide guidance specific to your situation and help you navigate any regulations or restrictions.
Remember, it’s crucial to comply with local regulations and tax laws to avoid any potential penalties or legal issues.
How to start an Airbnb business without owning property?
Starting an Airbnb business without owning a property is possible through various methods. Here are a few options to consider:
1. Renting: You can rent a property from a landlord and then sublet it on Airbnb. However, it’s important to check the terms of your rental agreement and ensure that subletting is allowed.
2. Property Management: Another option is to offer property management services to existing Airbnb hosts. This involves managing their listings, guest communication, cleaning, and other tasks in exchange for a fee or a percentage of the rental income.
3. Joint Ventures: You can enter into a partnership with someone who owns a property suitable for Airbnb. In this arrangement, you would handle the management and marketing aspects of the business while sharing the profits with the property owner.
4. Lease Agreements: Some landlords may be open to entering into a lease agreement that allows you to operate an Airbnb business in their property. This can be a win-win situation as it provides the landlord with a steady rental income and allows you to run your Airbnb business.
How does Airbnb's 90-day rule work?
It is illegal to rent out your Airbnb property for more than 90 days per calendar year in Greater London unless you have planning permission. Bookings are automatically blocked once that limit has been reached by Airbnb.
Property in Greater London isn’t eligible to be a furnished holiday let, which is important to understand regarding your tax affairs.
Does Airbnb count as self-employment?
In some cases, yes.
Generally, if you make money from property in the UK, it is taxed as rental income instead of trading income.
As a landlord, you’ll have to deal with repairs, clean communal areas, and handle utility bills, which aren’t considered business activities by HMRC.
The exception to this rule is furnished holiday rentals. Your profits will be treated as earned income if your property meets the conditions for a furnished holiday rental.
The rules for your Airbnb business will differ if you have incorporated it. For tax purposes, you won’t be considered self-employed, but rather an employee of your limited company – even if you are the only one running it. As with employment income, your salary will be taxed similarly, while dividends will be taxed separately.
A limited company director or anyone earning more than the £1,000 property allowance in a tax year must register with HMRC for self-assessment and file a tax return by 31 January the following tax year.
Airbnb: Should I form a limited company?
Limited companies can be tax-efficient in some cases because they are taxed at 19% on company profits (this rate may increase from 1st April 2023, but usually only if profits exceed £50,000), in contrast to income tax rates of 20%, 40% or 45% depending on your income level.
Depending on your preference, you can either pay yourself through a salary or dividends.
If things go wrong, a company can protect your personal assets, as its finances and debts are kept separate from yours.
A limited company director does come with new administrative responsibilities, including filing accounts with Companies House and submitting corporation tax returns to HMRC.
Furthermore, if you want to use a property you already own, things can get very complicated. It is possible to incur stamp duty and capital gains tax charges when transferring your property to a limited company, and interest rates on company mortgages can be high. Before you make this decision, we recommend reaching out to get professional advice.
Can I Airbnb my house if I have a mortgage?
Yes, you can Airbnb your house even if you have a mortgage. However, it is important to note that there are a few considerations to keep in mind:
– Mortgage Lender Approval: Before listing your property on Airbnb, it is advisable to check with your mortgage lender to ensure that you are not violating any terms or conditions of your mortgage agreement. Some lenders may have restrictions or require you to switch to a different type of mortgage.
– Insurance: It is crucial to inform your insurance provider about your intention to Airbnb your property. They may require you to adjust your policy or obtain additional coverage to protect against any potential risks associated with short-term rentals.
– Tax Implications: Renting out your property on Airbnb may have tax implications. You may be required to report the income you earn from Airbnb on your tax return and potentially pay taxes on it. On the other hand, you may also be eligible for certain tax deductions and allowances related to hosting on Airbnb. It is recommended to consult with a tax advisor to understand your specific tax obligations and benefits.
– Local Regulations: It is essential to familiarize yourself with any local regulations or restrictions that may apply to short-term rentals in your area. Some cities or neighborhoods may have specific rules regarding the duration and frequency of rentals.
How does Airbnb's 90-day rule work?
It is illegal to rent out your Airbnb property for more than 90 days per calendar year in Greater London unless you have planning permission. Bookings are automatically blocked once that limit has been reached by Airbnb.
Property in Greater London isn’t eligible to be a furnished holiday let, which is important to understand regarding your tax affairs.
Does Airbnb count as self-employment?
In some cases, yes.
Generally, if you make money from property in the UK, it is taxed as rental income instead of trading income.
As a landlord, you’ll have to deal with repairs, clean communal areas, and handle utility bills, which aren’t considered business activities by HMRC.
The exception to this rule is furnished holiday rentals. Your profits will be treated as earned income if your property meets the conditions for a furnished holiday rental.
The rules for your Airbnb business will differ if you have incorporated it. For tax purposes, you won’t be considered self-employed, but rather an employee of your limited company – even if you are the only one running it. As with employment income, your salary will be taxed similarly, while dividends will be taxed separately.
A limited company director or anyone earning more than the £1,000 property allowance in a tax year must register with HMRC for self-assessment and file a tax return by 31 January the following tax year.
Airbnb: Should I form a limited company?
Limited companies can be tax-efficient in some cases because they are taxed at 19% on company profits (this rate may increase from 1st April 2023, but usually only if profits exceed £50,000), in contrast to income tax rates of 20%, 40% or 45% depending on your income level.
Depending on your preference, you can either pay yourself through a salary or dividends.
If things go wrong, a company can protect your personal assets, as its finances and debts are kept separate from yours.
A limited company director does come with new administrative responsibilities, including filing accounts with Companies House and submitting corporation tax returns to HMRC.
Furthermore, if you want to use a property you already own, things can get very complicated. It is possible to incur stamp duty and capital gains tax charges when transferring your property to a limited company, and interest rates on company mortgages can be high. Before you make this decision, we recommend reaching out to get professional advice.
Fees for Airbnb
Fees for AirbnbSingle owner
One property Airbnb
Easy tax returns for individuals with a single Airbnb property.
Per owner, from
£285
+VAT
Joint owner
One property Airbnb
Easy tax returns for joint owners with a single Airbnb property.
Per owner, from
£185
+VAT
Single owner or Joint owner
Additional properties/owners
With more properties in your portfolio, it’s likely to be time for serious tax strategy. Our experts will work with you to make sure you have the right ownership structure and are taking advantage of available reliefs and allowances to keep your liability under control.
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