Demystifying the UK Tax Landscape for Airbnb Hosts: Essential Information for 2023

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The Insider @ Houst
Last updated on
February 2, 2023

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Demystifying the UK Tax Landscape for Airbnb Hosts: Essential Information for 2023

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Airbnb’s are a great way to make extra money, but they're also an opportunity for you to get into trouble with the taxman.

The UK government has made it very clear that short-term Airbnb rentals will be subject to taxation from April 2020 onwards - and if you don't pay your taxes properly then there could be serious consequences.

So how much do hosts need to know about tax? And what exactly is going on behind the scenes? In this guide we'll take you through everything you need to know about taxes for Airbnb hosts in Britain.

Table of Contents

What's the deal with Airbnb and tax?

Airbnb is a business, and you're responsible for paying taxes on your income. The good news is that they've got your back: they have partnered with Taxamo, a UK-based service that helps hosts calculate their VAT (value added tax) and income tax liability.

In order to get started with Taxamo, you'll need to provide some basic information about yourself and your property listing(s). You'll also need to provide details about how much money you made from hosting during the year--this can be done by providing screenshots from Airbnbs' online dashboard or submitting an annual report form that Airbnb provides. Once everything has been entered into the system, it should take less than five minutes for Taxamo to calculate exactly how much tax you owe!

Airbnb has a new tax partner in the UK

Airbnb has a new tax partner in the UK. The company has partnered with Taxify, an Estonian ride-hailing service that has been around for a few years and is expanding into other areas of travel.

Taxify will manage Airbnb's taxes on behalf of hosts, collecting them from guests when they book an accommodation through their platform and then passing them on to HMRC (Her Majesty's Revenue & Customs).

The decision was made after HMRC rejected several proposals from Airbnb over how it could collect taxes on behalf of its hosts without having access to their bank details or personal information--something which would break privacy laws.

Ready to elevate your Airbnb hosting experience in London? Explore our Airbnb Management London services and discover how we can assist you in maximising your property’s potential. Whether you’re an experienced host or just starting out, our expert team is here to help you achieve seamless property management and higher rental returns. Find out more about our services and embark on your journey to success today.

Airbnb’s are businesses, and taxes are their responsibility.

Airbnb is a business, and you are the host. Airbnb is the provider of the service and it's their responsibility to file taxes on behalf of their hosts.

The good news is that many hosts have been able to avoid paying any VAT (Value Added Tax) by using VAT Flat Rate Scheme as explained below:

How much do you pay in tax?

The amount of tax you pay depends on how much you earn. If you earn less than £1,000 in a year, then no tax is due. If your earnings are over this amount but under the personal allowance (the amount of money someone can earn before they have to pay income tax), then 20% of what remains will be taken as tax.

If your gross income exceeds the personal allowance for the year ending 5 April 2018 (£11,850), then 40% of what remains will be taken as tax.

VAT for short-term rentals

VAT is a tax on business sales. The VAT rate depends on the type of business and whether you're registered for it or not.

Short-term rentals are considered to be a service, so if you're renting out your home as a place to stay for less than 6 months, then your rental income will be subject to 20% VAT.

You can claim back this money by submitting an annual tax return in which you declare all purchases related to your rental activity during the year before claiming back any VAT paid on them (up until April 2020).

Taxes for private landlords

As a private landlord, you'll need to pay income tax on any profit made from renting out your property. You can deduct certain expenses from this profit - such as repairs and maintenance costs - but only up to the amount of income you receive.

In order for HMRC (Her Majesty's Revenue & Customs) to collect the tax due on your property rental activity they require you:

  • To fill out an annual Self Assessment Tax Return (SA100), which will be sent out by them in January each year;
  • To pay any outstanding tax within 30 days of receiving their notice;
  • Or agree an alternative payment arrangement with them if necessary

Continue reading: The 2023 Guide to Holiday Let Business Rates and Council Tax

Importance of record keeping

It is important to keep records of all your income and expenditure. This is so that you can prove that you are operating legally and paying the right amount of tax. If you don't keep records, HMRC may fine you.

It is very important for anyone making money from properties to file tax returns properly and pay the right amount of taxes.

It's not just your own money that has to be accounted for, but also any income you receive in the form of rent or other payments. If you don't pay enough tax when filing a return, HMRC (the UK's tax authority) may ask for more money later on.

The main taxes people pay are: Income Tax; Capital Gains Tax; Corporation Tax; Stamp Duty Land Tax (SDLT), which applies only to land purchases over £500k or £0-£300k if it includes a home). There are also some smaller ones like National Insurance Contributions (NICs).

Looking for expert insights on Airbnb management in London? Explore our comprehensive guide to discover valuable tips, strategies, and solutions for successful hosting in the vibrant city.

Tax implications of letting property through Airbnb in the UK

You will need to pay income tax on your Airbnb income. If you've been an Airbnb host for less than six months, you can claim back any expenses that you incur during that time period. For example, if someone damages your property while staying at your place and they don't pay for the damage (or even if they do), then you can claim this money back from HMRC as an expense when filing your tax return.

As a general rule of thumb, it's best to use services like TaxJar or TurboTax when filing your taxes because they'll help keep track of all of these different rules and regulations for each individual country where hosts operate their short-term rental businesses.

How to pay taxes on Airbnb income in the UK

As an Airbnb host in the UK, you must pay tax on your income from hosting. You will also need to file a self-assessment tax return every year and pay any taxes owed by March 31st of each year.

You'll be taxed on your profit from the Airbnb business - meaning that if a property earns more than its expenses (including mortgage payments), then this will be considered profit and therefore taxable. If a property loses money due to costs exceeding revenue, there will not be any taxable income generated for that period but it could still affect future years' profits depending on whether or not those losses are carried forward into later years (more on this below).

Are you allowed to run an Airbnb?

You will need a licence or permit to run an Airbnb. This is because the law states that you cannot rent out your property to guests for more than 90 days in any 12 month period without obtaining one from your local council.

If you are renting out a whole house, then this means that you will need an HMO (House in Multiple Occupation) license. If on the other hand, it's just one room being rented out and there are at least two people living in it as their main home - then no license is required!

If you're thinking about starting an Airbnb business, your local council's website will have more information. You'll need to check whether planning permission is needed for the property, what type of insurance is required and how much tax will be due on any income made through renting out the property.

The Insider @ Houst

The Insider @ Houst

The Insider team at Houst is dedicated to providing up-to-date and relevant information on short-term rentals. If you have hosting inquiries, please write to us at expert@houst.com. For guest inquiries, reach out at guest@houst.com. We are here to help you navigate the world of short lets and look forward to assisting you with your needs.

The Insider @ Houst

The Insider @ Houst

The Insider team at Houst is dedicated to providing up-to-date and relevant information on short-term rentals. If you have hosting inquiries, please write to us at expert@houst.com. For guest inquiries, reach out at guest@houst.com. We are here to help you navigate the world of short lets and look forward to assisting you with your needs.

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