29th January 2024Self-assessment tips for Airbnb and short-term let hosts

Since 1 January 2024, platforms like Airbnb specialising in short-term rentals have been required to send data on their clients’ earnings to HM Revenue and Customs (HMRC).

The new rules by HMRC will provide them with a view of the rental income of Airbnb and other short-term rental hosts. The rules require digital platforms to report sellers’ income through their sites on a routine basis. It also applies to other online selling platforms such as eBay and Vinted.

With less than two days to go before the online self-assessment deadline (31 January), Stevie Heafford, Tax Partner at HW Fisher, explains what short-term rental hosts need to be aware of.

Calculating how much tax you owe

As a host on Airbnb, you must pay Rental Income Tax. Your rental income and regular income combined will determine your tax band. Please note that this will not include the expenses incurred from hosting your property (we’ll get to that later).

You may also be obliged to pay Class 2 National Insurance if HMRC decides you have a property business or if your profits are over £6,725. However, this will be scrapped in the 2024/2025 tax year. If you earn over £12,570 from Airbnb hosting, you must pay Class 4 National Insurance.

If your earnings on hosting exceed £85,000 per year, you will need to pay Value Added Tax (VAT). If your property is only available for short-term let for less than 140 days per year, you will be required to pay council tax.

Understand your allowances and tax reliefs

Under HMRC’s rent-a-room scheme, an individual can receive up to £7,500 a year (£625 a month) from letting out a furnished room  in the house they also occupy without needing to report it to HMRC. This includes Capital Gains Tax, although if this exemption applies, the expenses for providing the accommodation cannot be deducted. Additional services offered, such as cleaning and meals, are acceptable within the exemption. However, any receipts which exceed the threshold would be classed as trading income, and so National Insurance charges would apply.

If the accommodation you rent out is a second property or a property you do not also occupy you may be applicable for up to £1,000 tax-free in rental income through the property income allowance.

Identify your “allowable expenses”

You can also reduce your tax bill by deducting various expenses from your earnings. This could include landlord’s insurance, cleaning and gardening services, rent, ground and service fees, mortgage interest (restricted to 20% tax relief), gas, electricity, and water. Find out about your allowable expenses here.

Complete your tax return on time

The deadline to complete the online self-assessment tax return is 31 January 2024. If you miss this deadline, you could face a £100 fine, which will increase if your return is more than three months late. For more detailed information on completing your return, including how to make your payment and setting up a payment plan, visit HMRC’s website.

If you have any queries, please get in touch with Stevie Heafford.

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