UK Airbnb tax guide for 2024

While Airbnb in the UK offers a convenient way to generate much-needed extra income, it also comes with Airbnb host tax responsibilities that shouldn’t be overlooked.

Starting from April 2020, the UK tax authorities have clarified 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.

So, what do you, as an Airbnb host, need to understand about your tax duties? Our guide aims to simplify and explain the tax essentials for Airbnb hosts in the UK, ensuring you stay informed and on the right side of the tax laws.

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What is a furnished holiday let?

Understanding if your Airbnb qualifies as a Furnished Holiday Let (FHL) is crucial for tax purposes and compliance. Here’s how to check if your property meets the FHL criteria:

• Availability: Your property should be listed for rent on Airbnb for at least 210 days annually.
• Furnishing: It must be adequately furnished for normal living conditions.
• Location: The property needs to be situated within the UK.
• Occupancy: It should be rented out to the public for no fewer than 105 days each year.

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Who takes care of tax payments, Airbnb or the hosts?

As an Airbnb host, you're part of the business structure. While Airbnb operates the platform, they also take on the tax filing for those hosting through their service.

Fortunately, a significant number of hosts have been able to bypass VAT charges by opting for the VAT Flat Rate Scheme, which we will explain below:

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Am I paying the correct property tax?

The type of tax you have to pay depends on how you use your property. If it's your primary residence and you rent it out, you'll owe Income Tax. However, if it's a property you own but don't primarily live in, such as an investment or secondary home, you'll be subject to Business Rates.

• In England: Your property is considered a self-catering business if it's available for rent for 140 days or more each year, making it eligible for Business Rates.
• In Wales: Similar rules apply; the property must be available for rent for at least 140 days and actually rented out for 70 days to qualify for Business Rates.
• In Scotland: Properties available for rent for 140 days or more may also face Business Rates. It's wise to consult with the local assessor, who will determine the rateable value based on factors like property type, size, and location.

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Am I liable to pay Council Tax?

You'll need to pay Council Tax on Airbnb properties only if they generate rental income taxed under Income Tax. If your property is assessed for Business Rates, then it won't be eligible for Council Tax.

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Do I need to register for VAT?

If your annual Airbnb income exceeds the VAT threshold of £85,000, you'll need to register for VAT. You have a few options for handling this additional cost: 

1) Absorb the VAT yourself. The good part is that you can reclaim the VAT paid on your rental business expenses by reporting them in your regular VAT submissions.

2) Pass it directly to your guests, this might not be popular.

3) Increase your nightly rates to share the VAT cost between you and your guests. This strategy can help maintain customer satisfaction while managing the financial impact on your business.

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Am I entitled to the UK Airbnb tax relief?

UK Airbnb hosts can take advantage of several tax reliefs and benefits if their properties qualify as Furnished Holiday Lets (FHL). Here’s a quick overview:

• Micro-Entrepreneurs Allowance: The UK government supports micro-entrepreneurs with a scheme that allows Airbnb hosts to deduct £1,000 from their gross income. This deduction helps reduce the taxable income from property rentals.

• Capital Gains Tax Relief: If your property is classified as an FHL and it's an investment property you don’t reside in but rent out, you can benefit from a reduced capital gains tax rate. Under the Entrepreneurs' scheme, the rate is only 10% compared to the standard 28%. Additionally, the rollover scheme permits deferring capital gains tax when you sell one Airbnb property and purchase another.

• Gift Hold-Over Relief: This scheme allows you to avoid paying capital gains tax by gifting business assets or selling them below market value to assist buyers. This relief can also enhance your pension contributions and allows you to claim capital allowances for property furniture and fittings.

These tax benefits make managing Airbnb properties more financially appealing and can significantly impact your returns and growth as a host.

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Need help with your Airbnb?

Nowadays you can find lots of online information about handling your Airbnb taxes. For your convenience, we've curated a selection of useful websites that we believe are worth a visit:

1. UK Gov website – Self Assessment Tax Returns
2. Airbnb – Guidance on the UK taxation of rental income
3. Go Simple Tax Software – Self Assessment tool

Contact our specialists now for expert advice and assistance with your Airbnb taxes.

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