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 doesn’t have to be complicated
We take the stress out of Airbnb tax by…
Doing your tax return and Making Tax Digital
You’re busy enough running your Airbnb business without having to fill out a self-assessment tax return every year. We’ll take all the paperwork off your hands, making sure your return is filed accurately and on time. With Making Tax Digital on the horizon and due to start for landlords in April 2023, we’ll get you set up and compliant well before time.
Setting up your business structure
It all comes down to your plans for your Airbnb. Is this a long term or short term venture? Are you looking for pension income from your Airbnb? Do you want to pass it on to the kids? Depending on your circumstances, the right structure for your Airbnb business will save you money. We’ll work out the case for you based on your circumstances and help you to structure your tax affairs effectively.
Making your property income work harder
There are a few different tax reliefs and allowances that might apply to your Airbnb let, but it can be tricky to figure out which ones you can use. Should you opt into the rent-a-room scheme? Which expenses can you claim?
We’ll work it all out for you, helping you to maximise your income and minimise your tax bill.
Frequently asked questions
Do I have to pay tax on Airbnb income?
If you’re hosting as an individual, rather than as a limited company, the money you make through Airbnb is considered a part of your taxable income.
If your taxable income as a whole goes above the personal allowance, which is £12,570 for each year from 2021/22 to 2025/26, you’ll be charged at your marginal rate of income tax.
There are also various allowances and reliefs that might make some or all of your Airbnb income tax-free, depending on your circumstances.
What expenses are deductible from my Airbnb income?
You can deduct expenses from your Airbnb income before tax as long as they were incurred “wholly and exclusively” in running the business.
This might include:
- full tax relief for mortgage interest
general maintenance and repairs to your property, but not improvements
water rates, council tax, gas and electricity
- costs of services, such as cleaners
- accountant’s fees.
You can read our full guide on deducting expenses against rental income here.
What tax relief can I get on Airbnb income?
Everyone has a property allowance of £1,000 in each tax year, for any income you get from land or property. If you own a property jointly, each owner is eligible for the full £1,000 against their share of the rental income.
If you’re eligible for this and your annual gross property income is £1,000 or less, you don’t need to tell HMRC or declare this income on a tax return.
Alternatively, you might qualify for:
- The rent-a-room scheme, which allows you to earn up to £7,500 tax-free provided that you were living in the property at the same time as the tenant occupied it.
- Furnished holiday letting status, which comes with several tax advantages.
Our blog post on the tax advantages of Airbnb covers this topic in more detail.
What is the Airbnb 90-day rule?
This is a rule that applies to London in particular – you can’t let your Airbnb property out for more than 90 days per calendar year in Greater London, unless you have planning permissions that allow you to do this. Airbnb automatically prevents bookings once you’ve reached that limit.
This is important to your tax affairs because it means you can’t meet the qualifying conditions for a furnished holiday let if your property is in Greater London.
Is Airbnb considered self-employment?
Generally speaking, the money you make from property in the UK is classed as rental income for the purposes of income tax, rather than trading income, unless the work you do amounts to running a business.
In HMRC’s eyes, the usual jobs you’ll have to carry out as a landlord don’t count as a business – things like dealing with repairs, cleaning communal areas, and managing utility bills.
Furnished holiday lets are an exception to this. If your property meets the conditions for a furnished holiday let, your profits will be treated as earned income.
Finally, if you’ve incorporated your Airbnb business, another set of rules applies. You won’t be classed as self-employed for tax purposes, but as an employee of your limited company – even if it’s just you running it. Any salary you take will be taxed in the same way as employment income, and dividends will be taxed at separate dividend tax rates.
In any case, if you earn more than the £1,000 property allowance in a tax year or you’re a limited company director, you’ll need to register for self-assessment with HMRC and complete a tax return by 31 January after the end of each tax year.
Sould I set up a limited company for Airbnb?
Forming a limited company can be a tax-efficient option in some cases, with corporation tax charged at a rate of 19% (from between 19% to 25% from 1st April 2023) on company profits, compared with income tax rates which currently stand at 20%, 40% or 45% depending on your income threshold.
You can then pay yourself through a salary, dividends, or a combination of both.
A company can help to protect your personal assets if things go wrong, as it means you’re making all of the company’s finances and any debts, separate from your own.
Becoming a limited company director does mean taking on a new set of administrative responsibilities, however, and you’ll need to send corporation tax returns to HMRC and file accounts with Companies House.
Plus, things can get very complicated if you want to use a property you already own. Transferring your property to a limited company might incur stamp duty and capital gains tax charges, and interest rates on company mortgages can be expensive. We’d always recommend getting professional advice before you take this step.