Tax guide for Airbnb landlords

tax guide for Airbnb landlords

You may be searching for a tax guide for Airbnb landlords. Search no further, because in this blog we will make this clear and simple for you.

You have decided to let a property as Airbnb (or Furnished Holiday Let) or you are simply considering whether this is the right investment for you. Of course, there are many things to consider, but one of the most important of these is how much tax you will need to pay.

Income made from Airbnb properties, like Furnished Holiday Lets, is considered by HMRC as trading income, so it is subject to tax. You will have to submit a self-assessment tax return every year to declare the income from your Airbnb properties (the deadline to submit your self-assessment is every year on 31 January). Please be aware that if you advertise your property through Airbnb, HMRC will be made aware of your trading because Airbnb is sharing with HMRC its data on the earnings of its hosts.

In order to not pay more tax than you should, you have to understand what expenses you are allowed to claim, in other words what expenses are allowed to be deducted from the income you make.

What is Airbnb ?

Aribnb is renting out a property on a short-term basis, usually by advertising it on official Airbnb channels. With respect to HMRC, this qualifies as a Furnished Holiday Let, and is treated differently with respect to taxes and expenses allowed than properties that are rented to the same tenant for a minimum of 6 months. There are different rules that apply for properties that are offered as rentals on a long-term basis. This blog is designed specifically as tax guide for Airbnb landlords.

What are the criteria to qualify as Airbnb ?

There are some straight forward criteria that HMRC have set out in order to determine whether a rental qualifies as Airbnb:

  1. The property must be let for at least 105 days with the same the tax year
  2. The property must be available to be rented for at least 210 days within the same tax year
  3. It must not be let to the same person or organisation for more than 31 days without a break
  4. It must be furnished such that it meets the requirements for day to day living
  5. It must not be rented to family and friends, in other words the people rented it are tourists
  6. The property is located in the UK

What expenses can you claim against your Airbnb income ?

As a rule of thumb, the expenses that can be claimed must be related to the use and maintenance of the Airbnb.

  1. Capital allowances. These are reductions in the value of the furniture, fixtures and fittings directly related to the Airbnb you are letting. This means that a percentage of the cost of these assets can be set off against the taxable profit you make from letting the Airbnb. The assets that qualify range from items of furniture (sofa, tables, chairs, cabinets, etc), furnishings (curtains, beddings, pillows, etc), white goods (fridges, freezers, etc), electrical appliances, to more substantial household items such as kitchen units, sanitary ware and plumbing, carpets. Property repairs and replacements may also qualify as capital allowances. You will only be able to claim capital allowances on new builds or on a property that is converted to Airbnb (or Furnished Holiday Let).Mortgage interest. If you have mortgaged the property you are letting as Airbnb, then the full amount of the mortgage interest can be claimed, because it is tax-deductible in full.
  1. Legal fees. All legal fees related to the Airbnb such as mortgaging or re-mortgaging, drawing up rental agreements, etc
  2. Travel expenses. You can claim travel expenses for trips you take to visit your properties that are reasonably far from where you live: mileage is £0.45 per mile for the first 10000 miles per tax year and £0.25 per mile for all miles thereafter that you cover driving your car.
  3. Maintenance. This is probably the most common type of expense. It relates to the costs you incur to maintain the Airbnb property, such as cleaning, gardening, etc.
  4. Utility bills. All utility bills related to the Airbnb property you are letting qualify: utilities (water, electricity and gas). council tax can be claimed if the property is empty.
  5. Council Tax. You can claim the full amount of Council Tax paid for the Airbnb property for the periods of time that it is empty.
  6. Management costs. All business costs related to the Airbnb you are letting qualify, such as: accountancy fees, marketing & advertising, insurance, online platform fees, membership charges of landlord/property associations.
  7. Computer & mobile phone costs. You can claim a percentage of the computer or laptop as well as mobile phone that you use for the purpose of running your business. It is up to you to appreciate what this percentage is, withing reasonable limits.

 

What expenses are not allowed ?

The costs and expenses incurred when you buy a property are treated as part of the purchase price. This means they cannot be set against future rental income. Typical expenses (stamp duty, legal fees, surveys and auctioneer costs) should be set against future capital gains liabilities if you sell the property.

 

How can LAS Accounting help you ?

We hope you found this tax guide for Airbnb landlords helpful.

When it comes to navigating complex accounting areas such as taxes on rental income, you may find you want professional help. Spending less on tax means you have got more money to put towards your financial goals, and a financial adviser could help you put together a plan.

Now might be the ideal time to engage the services of an accountant to do all the work for you and provide you with all the tax advice you need.

Don’t hesitate to get in touch for any further enquiries at: info@las-accounting.co.uk

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