Do I have to pay tax on Airbnb earnings in the UK?

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Airbnb is a great way to earn extra income from a spare room in a property you own. However, you may be liable to taxes on the income received from your Airbnb listings. How much tax you are liable to pay will depend on your personal circumstances, how much income you generate and how often the room is rented out. The 3 taxes you must be aware of when generating income from your Airbnb are income tax, business rates and VAT.

Income tax

If the room you are letting is in your primary residence, you will be taking on a lodger and will be eligible for the Rent a Room scheme. The Rent a Room scheme gives you a £7,500 tax-free allowance on income generated from letting out furnished accommodation in your main home. If you are letting a room via Airbnb, you can claim a £1,000 tax free allowance from the government but this can't be claimed in conjunction with the Rent a Room scheme.

Rental earnings which exceeds your tax free allowance will be treated as income tax. The rate you will pay on the earnings which exceed the allowance will depend on your income and tax band. For example, if you are a higher rate payer, you will need to pay 40% of your rental income to HMRC.

Business rates

If you are running your Airbnb rental as a business with multiple listings, you may be liable for business rates if a property is available to let as a short term holiday let for 140 days a year. You may also be liable for business rates if your guest house takes on more than 6 guests at any one time.

VAT

You will need to register for VAT if you rental turnover exceeds £85,000. How much VAT you charge will depend on the category you fall into.

Taking on a lodger can be a great way to increase your income from a spare room in your property. Whilst lodgers tend to be onboarded more informally than tenants, it is best to have a simple yet robust agreement which outlines each side's rights and obligations. To create a lodger licence agreement in minutes, register with Legislate and watch our lodger licence tutorial.

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