Tax guidance for Airbnb businesses and hosts


Airbnb has become a huge and successful platform to find quick accommodation. It has revolutionized both the rental and hotel industries. However, along with an amazing opportunity to earn extra income by short-term and long-term letting, hosts in the UK might face complexities of tax regulations regarding potential issues with HMRC. In this blog, we will provide a comprehensive overview of the tax rules for Airbnb hosts engaging in short-term and long-term letting in the UK.

Can property be let as a holiday let?

If you are planning to rent out a mortgaged property, then you’ll need to check the lender terms. Some lenders are very specific about the contract terms and conditions and breaking them can have harsh consequences.

Short-term letting (for less than 28 days) might not be a problem but for long term (for more than 28 days) letting you may need to switch mortgages. That’s why it is important to discuss these things with your lender early on.

Is Airbnb classed as being self-employed?

If the whole property (or part of it) is rented out, the resultant income will be classified as rental income. It’s a little bit confusing here as Airbnb hosts are making money as small business or sole traders and looks like they are self-employed. Actually, they are not, and different tax rules apply here.

Is Airbnb income taxable?

You must declare any property or self-employment income if you receive a total income of more than

£1000 from it in a tax year. This is thanks to the tax-free trading allowance.

What is tax free trading allowance?

It means if you can earn up to £1000 as property income or as a sole trader in a tax year, then you won’t

have to declare this to HMRC. You will get a £1000 allowance each if both incomes are less than £1000.

But if you earn more than £1000, then you will need to register with HMRC and declare your rental income from Airbnb.

How to pay tax on Airbnb income?

To pay taxes on your Airbnb income, you must register for Self-Assessment by October 5th following the end of the tax year you need to report. Once registered, you’ll submit tax returns and provide details of all your earnings, including income already taxed, such as wages from an employer. This process is necessary for declaring your income as a sole trader.

How much tax will be paid on earnings from Airbnb?

You’ll pay tax on your Airbnb earnings above the Personal Tax Allowance (£12,570 for the 2023/24 tax year). However, there are other allowances and tax reliefs available to potentially reduce your tax bill. The tax you owe is calculated based on your profits after deducting any allowances or expenses, not your total income.

Claiming the trading allowance on your tax return:

Remember the £1,000 trading allowance we discussed earlier? You can still claim it even after registering with HMRC. On your tax return, you can choose between claiming the trading allowance or your expenses.

If your Airbnb property expenses are less than £1,000, it’s best to claim the allowance to reduce your tax bill. But if your expenses exceed the allowance, claim those instead! Choose what benefits you the most.

Is Airbnb letting VAT able?

If your rental income reaches the £85,000 VAT threshold in a year, you must register for VAT. You have several options in this situation:

  • Charge VAT to your guests: Add an additional 20% VAT on top of the rental
  • Absorb the VAT cost yourself: Cover the VAT amount from your rental income without passing it on to
  • Meet in the middle: Consider a compromise that benefits both you and your guests, keeping prices competitive while sharing the VAT.


Airbnb Landlords targeted by HMRC:

HMRC’s One to Many (OTM) letters campaign is designed to enhance tax compliance by identifying taxpayers who might have unreported income or unpaid taxes. Short-term property letting, including properties listed on Airbnb, is one of the areas targeted by this initiative.


If you have rented out a property on Airbnb but haven’t declared this income on your tax return, you may receive a letter from HMRC as part of the OTM campaign. The letter aims to remind taxpayers of their tax obligations and encourages them to rectify any discrepancies in their tax filings.

This letter will request you to review your tax affairs and ensure that you have paid the accurate amount of tax on your Airbnb income. It is essential to respond promptly and take necessary actions to ensure your tax compliance. Ignoring the letter may lead to additional consequences, such as penalties and interest charges.


Are you an Airbnb host or considering becoming one?

We are here to assist you in staying compliant with HMRC and its property rental tax regulations. Contact BNW Accountants & Tax Consultants on 020 8648 0800 for a free consultation today, or you can reach us at for more information.

Let us help you navigate the tax rules and ensure smooth operations for your Airbnb rental.

Capital Gains Relief Tax:

As an Airbnb host renting out a room in your home, you might be considering the idea of purchasing an investment property for Airbnb purposes. If your home qualifies as a Furnished

Holiday Let and is not your primary residence, you could potentially be eligible for Capital Gains Tax relief.

  • Entrepreneurs’ Relief plan: Pay a reduced 10% capital gains tax instead of 28%.
  • Rollover Relief plan: Avoid paying Capital Gains Tax on the sale of your first Airbnb
  • Potential CGT: relief by selling assets below their value to aid the
  • Capital allowances: for furnishings and

What is Section 24 for landlords?

Section 24 is an update to UK tax laws affecting landlords’ tax calculations. Under these changes, landlords can no longer deduct mortgage interest and other costs (like mortgage arrangement fees) from their rental income before calculating their tax liability.

This update is significant because deducting allowable expenses from rental income reduces the taxable amount, resulting in a lower tax bill for landlords. However, with the new rules in place, landlords need to adjust their tax planning strategies accordingly.

Setting up a limited company for Airbnb business:

The tax advantages of forming a limited company for an Airbnb business compared to operating as a sole proprietor may differ based on individual circumstances. There are some general potential advantages of establishing a limited company:

  • Tax Deductions: Limited companies often have more extensive tax deduction opportunities for business-related expenses, such as property costs, maintenance, utilities, insurance, and other expenses associated with running the Airbnb
  • Lower Tax Rates: In certain jurisdictions, limited companies might be subject to lower tax rates than individual sole proprietors, particularly as the business grows and generates higher
  • Limited Liability: One significant benefit of setting up a limited company is the concept of limited This means that the company’s owners (shareholders) typically have

their personal assets protected and are not held personally liable for the company’s debts or obligations. In contrast, a sole proprietor is personally liable for all business debts.

  • Capital Gains Tax Benefits: Depending on the tax laws, limited companies may enjoy potential capital gains tax advantages when selling or transferring property or assets used in the Airbnb
  • Tax Planning Flexibility: Limited companies often have more options for tax planning and structuring compared to sole proprietors. They may have greater flexibility in determining when and how to distribute profits, enabling better management of the overall tax
  • Credibility and Perception: Operating as a limited company can enhance the credibility and professional image of your Airbnb business, which may attract more guests and potential

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