We asked our partners at TaxScouts to share their top tips and resources to help Hosts on Airbnb better understand their tax obligations. Read their guide on rent-a-room relief.*
Did you know that if you rent out a room in your home, HMRC sees you as a landlord? Your official title is a resident landlord – and being one affects the tax you’re expected to pay. At TaxScouts, we speak to all sorts of landlords every day, so as a proud partner of Airbnb, we’ve put together this guide on the tax implications for private room Hosts on Airbnb and the tax reliefs you may be able to claim.
Officially known as the Rent-a-Room scheme, this is a tax-free allowance that means you can earn a certain amount in rental income without paying tax on it. It can be used exclusively by those who rent out a room in their house, rather than those who rent out their whole property. And this, as a result, affects lots of Hosts on Airbnb.
How does it work?
You can earn up to £7,500 in rental income per tax year totally tax-free. Anything over that you pay tax at the usual rates:
|Up to £12,570||0%||Personal allowance|
|£12,571 to £50,270||20%||Basic rate|
|£50,271 to £150,000||40%||Higher rate|
|Over £150,000||45%||Additional rate|
So as an example, if you earned £37,000 per year as an employee and earned £1,000 per month from renting out a room in your house, your total income would be split like this:
Total income = rental income + salary
- This makes you a basic rate taxpayer
- £12,570 – personal allowance – tax-free
- £24,430 – basic rate – 20%
- £7,500 – tax-free Rent-a-Room allowance
- £4,500 – taxed at 20% basic rate
To estimate what you might owe based on your earnings, check out the TaxScouts rental income calculator.
How does rental income tax work?
When you earn money from renting property, you’re expected to file a tax return. This is because the money you earn from rental income is untaxed, so needs to be declared to HMRC. There’s a simple process to follow when it comes to doing this.
- The tax year runs between 6 April to 5 April the following year so anything you earn in rent or spend as a Host on Airbnb between these dates needs to be recorded
- Register for Self Assessment by 5 October – following the end of that tax year:
i.e. If you earn rental income between 6 April 2021 and 5April 2022, register for Self Assessment by 5 October 2022
- File and pay your tax return by 31st January
As we explained above, the rate of tax that you’ll pay is based on your total income. In other words, your employment income, rental income and any other income sources. The tax that you pay on this is Income Tax.
Can I claim expenses with Rent-a-Room relief?
In short, no.
You can claim one or the other. If you’re not sure which one to choose, you should base it on whichever is higher. If you spend more than £7,500 on renting out your room on Airbnb during the tax year, it’s more tax efficient for you to claim your expenses. If you spend less, you should claim the Rent-a-Room scheme.
OK… and what are expenses?
The term expenses is another way of describing your business spending. When you have to file a tax return, you can deduct business spending from your overall earnings so that you’re only paying tax on your profits. As long as the purchases are “wholly and exclusively” from your hosting activities on Airbnb, HMRC will allow you to deduct them from your income total.
Ready to file your tax return?
TaxScouts get an accredited accountant to file your tax return for you. It’s online, can be done in as little as 48 hours, and as Hosts on Airbnb, you get a 10% discount on the first return you file meaning a fixed price of £107. Visit taxscouts.com/airbnb to get started.
*We recommend that you do your own research as the information isn’t comprehensive, and does not constitute legal or tax advice. Also, as we don’t update the articles in real time, please check each source and make sure that the information provided hasn’t recently changed.