Becoming an Airbnb landlord: Your key questions answered

1. Do I have to pay tax on Airbnb income?

Yes. Airbnb hosting income is taxable in the UK. The tax treatment and relief available depends on whether the property is your main residence or not.

2. I am currently renting rooms to guests via Airbnb. Do I need to charge VAT?

Yes, if you are already VAT registered or your taxable supplies are more than £85,000 pa (2023/2024).

Airbnb income falls within the definition of holiday accommodation so is standard rated. Therefore, if your income exceeds the threshold, you need to register for VAT and file regular VAT returns to HMRC.

2. I am renting rooms in my own home to guests via Airbnb. Can I claim rent-a-room relief?

Yes. If you rent out a room where you live you will qualify for rent a room relief.

3. What is the Rent a Room Scheme?

The Rent a Room Scheme is an income tax relief which allows you to earn £7,500 tax-free each year.

4. How does it work?

The scheme applies when short-term guests stay in a furnished room or rent your whole property – as long as it is your main residence and in the UK.

It also applies if you have a lodger or run a Bed & Breakfast or Guest House as long as it is within your main residence and it is furnished.

As a result you will get a tax free allowance of £7,500 each year. If your rental income is less than £7,500, you do not need to declare the income on a tax return as the income is exempt automatically.

If it is more than £7,500 you will need to complete a tax return. There are then two options available:

A) Deduct the allowable expenditure incurred, such as letting agents fees and insurance from your gross rental receipts and pay income tax on the net rental profits.

B) Do not deduct any allowable expenses and instead claim the £7,500 tax free allowance and pay income tax on the net amount.

You can switch between these options each year.

5. Is it correct that homeowners who let out via Airbnb do not need to declare or pay tax on the first £1,000 they earn per year?

Yes, each person has a property income allowance of £1,000 they can use instead of deducting actual expenses. However, it cannot be used if you opt in to the Rent a Room Scheme.

6. Are there any other tax advantages to being an Airbnb landlord?

Yes, if you meet the qualifying conditions for Furnished Holiday Letting there are additional tax advantages. For example, rental profits are treated as ‘Earned Income’, therefore you should be able to make a bigger contribution to a pension scheme as the amount a taxpayer can pay in depends on their level of ‘Earned Income’.

Capital Allowances should also be available along with a deduction for any allowable loan interest.