It’s the era of staycations, domestic holidaying, and needing new sources of income.
Spare rooms have become an asset.
There are nearly a quarter of a million Airbnb landlords. Add in other platforms such as HomeAway, direct services like Booking.com and holiday letting services, and it’s understandable that homes are big competitors to the hotel industry in the 21st century.
It’s a great way to earn a bit of extra income, if you’re lucky enough to have a spare space in the right location.
The tax system lets you start off with limited obligation. But as you earn more, you’ll want to make sure you’re compliant.
This is where untied comes in. We help you follow the rules and reduce the tax you pay on your property while being an expert in yourself, not an expert in taxes.
Do I need to tell HMRC?
If you earn more than £7,500 from property income, then yes. Good news is that we can get you going really easily with a simple form and a one-off charge of £20 in exchange for which you get a voucher for £25 off an untied membership. You can also register directly with HMRC. If you’re earning less than this … see our help article.
Do I have to declare my rental 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 tax free. If you earn more than this, the short answer is yes, you do.
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.
How much tax do I have to pay on my rental?
When it comes to paying tax on your rental 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).
Whatever your property, untied prompts you to answer a few simple questions and then calculate the right allowances for you. Easy peasy.
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 – it’s a messy calculation, which of course untied takes care of so you don’t need to worry about it.
And it’s not just interest. untied pro 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.
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 it’s important to note that there are a couple of limitations.
First, if you rent out your home while you move abroad you cannot take this relief. Second, you can’t create a loss using the rent a room allowance, so if your expenses are more than your rents you might want to calculate things 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, you can choose to pay tax on the rents above the rent a room allowance or claim all relevant expenses (but you can’t do both). Of course, untied helps you select the best options for you.
The bottom line
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 untied 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.
Got any questions? Get in touch.