Do refunds and cancellations affect my taxes as a host on Airbnb?
As a host on Airbnb, you know that some reservations don’t always go ahead as planned. Cancellations and refunds are part of the reality of hosting, but did you know they can impact your tax obligations*?
Whether you’re refunding a guest or navigating a last-minute cancellation, it’s important to understand how these changes affect your taxable income. In this article, our partners TaxScouts will be breaking down the details, so you can keep your taxes in check and avoid surprises when it’s time to file your Self Assessment tax return.
What happens when you issue a refund?
A guest refund can reduce your taxable income, but only when it’s properly documented. For example, when a guest cancels a booking and you issue a refund, the refunded amount is no longer treated as taxable income.
Easy, right? Well, it’s a bit more complex than hitting the “refund” button and calling it a day. To make sure your refund is properly accounted for on your tax return, you need to keep clear records.
How to Document Refunds:
- Access your Airbnb transaction history: log into your host account and go to your Transaction History. Here, you’ll find a breakdown of all transactions, including refunds.
- Download your annual financial summary: Airbnb provides an annual financial report, which includes refunded amounts. You can download it in the Tax Documents section of your host account.
- Record details manually: keep a record of the guest’s name, booking ID, refund date, and the refunded amount. These details are crucial for adjusting your income when filing your Self Assessment.
Tip: HMRC requires that you keep records of all transactions for at least five years, so make sure your documentation is clear and organised.
Impact on allowances and thresholds
Refunds don’t just affect your income, they can also have an impact on various tax allowances and thresholds. Here’s how:
- Proportional expenses: even if you refund a guest, related costs like cleaning or laundry may still be deductible. For example, cleaning expenses for a cancelled booking can remain valid business deductions.
- Eligibility for tax reliefs: refunds might lower your total income below the threshold required for certain schemes:
- Rent-a-room relief: to qualify for up to £7,500 of tax-free income under this scheme, your earnings must meet the threshold before deductions. If refunds reduce your income, you might lose eligibility.
- Furnished holiday let allowances: properties must meet letting criteria (e.g., 210 days available, 105 days let). Refunds reducing income might affect eligibility.
To put it simply, refunds can reduce your taxable income, but they also bring some tax considerations. Keep clear records to stay on track when filing your tax return.
Adjusting your tax return for refunds and cancellations
If you’ve issued a refund and need to reflect it on your Self Assessment, it’s easy to make changes. Here’s how:
- Log into your HMRC account: go to the HMRC Self Assessment portal.
- Access the income section: this is where you report your earnings from hosting on Airbnb (typically under Property Income).
- Enter adjusted figures: subtract the refunded amount from your total earnings and input the revised figure.
- Attach documentation: keep all transaction details handy (HMRC likes to see numbers). Your transaction summary from hosting on Airbnb will be useful here, providing a clear breakdown of what’s been refunded.
Once you’ve filed your Self Assessment, you’ve got up to 12 months after the deadline to make any changes. So, if you spot an error or forget something, you’ve got a bit of time to fix it.
For example, if you filed for the 23/34 tax year, the deadline to file would be 31 January 2025, whilst amendments can be made until 31 January 2026.
Avoiding common mistakes
When managing refunds and cancellations, mistakes can easily go unnoticed and affect your tax return. Here are a few common errors and simple solutions to help keep your Self Assessment on track.
| Mistake | Solution |
| Forgetting to account for refunds | Double-check your figures by comparing the records in your Airbnb account against your declared income. |
| Overlooking deductions tied to cancelled stays | If a booking gets cancelled and you issue a refund, any expenses related to that booking (like cleaning or laundry) should be adjusted accordingly. |
| Failing to update your tax return after a refund | If you’ve issued a refund after filing your Self Assessment, failing to update your return could result in your overpaying tax. |
By staying on top of these potential issues, you’ll ensure your tax return is accurate.
Understanding refunds, cancellations and taxes
Refunds and cancellations might feel like speed bumps in your hosting journey, but taxes are straightforward when you know what to do. From documenting refunds to adjusting your deductions and avoiding common mistakes, staying proactive is the key to keeping your Self Assessment accurate and hassle-free.
Next Steps
If you’d like support from a tax professional, you can contact TaxScouts. Hosts on Airbnb can claim a 10% discount on their first TaxScouts tax return or tax consultation.
*We strongly recommend that you do your own research as the information in this article is not comprehensive and does not constitute legal or tax advice. As we do not update the articles in real-time, please check each source and make sure that the information provided has not recently changed.