More and more of us are topping up our income by offering a spare room or a temporarily vacant home to holidaymakers or business travellers through Airbnb. In just twelve short years, Airbnb has grown to become a ubiquitous part of 21st-century travel and now around 8.4 million travellers a year to the UK book through Airbnb. A nice little earner if you’re lucky enough to have a spare room in the right location – and that’s not just in major cities and popular holiday spots.
But (and there’s usually a but) there are tax rules you do need to be aware of, although, you shouldn’t find them too onerous, especially if you use the newly launched, untied personal tax app (hint: download now from the Google Play Store or Apple App Store). Whilst you’re downloading the untied personal tax app, here are answers to the four essential Airbnb tax FAQs.
1. Do I have to declare my Airbnb income?
If you’re just dipping your toe in the water, the good news is that HMRC don’t expect you to declare Airbnb or other property income if the total for the year is less than £1,000. And if it’s in your own home, then you can earn up to £7,500. If you earn more than this, the short answer is “yes”!
That doesn’t necessarily mean you’ll pay tax on it, though. We are all entitled to earn a certain amount of money tax-free irrespective of what the source is, whether from employment, dividends, or income from renting out space using services like Airbnb. And you’re also able to claim certain expenses. However, it must be declared in your annual self-assessment tax return.
2. How much tax do I have to pay on my Airbnb?
When it comes to paying tax on your Airbnb income, there’s a difference between renting out a room in your own home and renting out a room in an investment property or a property that you don’t live in all the time (and, for that matter, renting out the whole of your home). You’ll be pleased to know that if you use the untied personal tax app it will prompt you to answer a few simple questions and then calculate the right allowances for you.
3. What kind of expenses can I claim if I’ve bought a property to rent out?
Your profit is the amount left once you’ve added together your rental income and taken away the expenses or allowances that you can claim. If you’ve bought a property to rent out, the kind of expenses you can deduct if you pay for them yourself is quite extensive and includes general maintenance and repairs (but not the cost of large improvements), utility bills and council tax, any ground rent and service charges, building and contents insurances, the cost of services such as cleaning or gardening and the direct cost of letting the property such as advertising, agents’ fees and legal costs.
You can also claim the costs that Airbnb charge you and other services associated with it. Some mortgage interest does qualify as a deductible expense, although since 6 April 2017 this is restricted for higher rate taxpayers. And it’s not just interest. The untied personal tax app makes it very quick and easy to run through payments you’ve made from your bank accounts, and then tag and list those items that you want to claim as expenses.
4. What kind of expenses can I claim if I’m renting out a room in my home
If you rent out a furnished space in your home and you earn less than £7,500 a year then your income is automatically covered by a “rent a room allowance” so you pay no tax on it. The limit is halved if you share the income with a partner and there are a couple of limitations. First, if you rent out your home while you move abroad you can’t take this relief. Second, because you can’t claim other expenses, if you make a loss you’d pay tax in the normal way instead of using the scheme.
If you have more than £7,500 of income from renting out space in your own home, then there are further options to reduce the tax you pay. And, of course, the untied personal tax app helps you select the options that apply to you.
untie your Tax Return
So, as you’d expect, there are some tax implications which come with renting out an Airbnb room, apartment or house. And, the rules do change from time to time. But, the good news is with the new untied personal app you don’t need to be a tax expert to be the consummate Airbnb host.
The app makes it easy to stay on top of your Airbnb income and expenses, prompting you to pay exactly what you owe and claim any tax relief you might be entitled to. It’s quick to use, automating repetitive tasks, freeing up time that frankly no one should want to spend on their taxes. You can save even more time by using the app to submit your end of year self-assessment to HMRC directly from your mobile phone. Handy as the January 31st submission deadline is fast approaching.