This sharing economy, combined with the convenience of mobile devices, has seen the birth of a number of online services that enable individuals to share assets.
When it comes to property, individuals are now finding new, innovative ways to generate income. This sharing economy is helping to facilitate this with a number of different platforms available for sharing a person’s residence, with Airbnb being one of the most well-known.
In this article, we look at the implications of using such platforms to generate property income and the tax reliefs that are available to you.
How is property income taxed?
At a very basic level, income tax is payable on all earnings arising in the UK, which includes income arising from a property business. A property business can include any business generating income or rental income from land or from a property let furnished, unfurnished or a furnished holiday let.
What are the tax implications of being an Airbnb host?
UK rental income is liable to tax based upon rental income less rental expenses. These are calculated on the accruals basis. However, there may be some exemptions and reliefs available for Airbnb hosts.
Airbnb tax reliefs
If you are using Airbnb or a similar platform to rent rooms in your property there are two key tax reliefs that you should be aware of.
Rent-a-room relief
The most relevant exemption here is the rent-a-room relief which applies when a furnished room in your main residence is rented to a third party.
Also, the relief is available if a taxpayer runs a guest house or bed and breakfast business, or provides meals and cleaning.
However, the relief is not available where the accommodation is:
- not part of the main residence when it is let,
- not furnished,
- the whole residence rather than part of it.
Accordingly, rent-a-room relief only applies to ‘Shared room’ and ‘Private room’ listings and not to ‘Entire place’ listings on Airbnb.
Historically, the rent-a-room scheme meant that the first £4,250 of rental income was tax free. However, this was increased to £7,500 from April 2016.Therefore, if the taxpayer earns less than £7,500 from renting a room as an Airbnb host, there will be no tax to pay.
If the earnings exceed £7,500 from the Airbnb listings then the excess will be taxable and a tax return will need to be submitted.
“micro-entrepreneurs” tax break
There is also a tax break for “micro-entrepreneurs” that use sharing platforms like Airbnb.
From April 2017, homeowners in the UK that let out their properties on Airbnb will not need to declare or pay tax on the first £1,000 they earn on the platform per year.
If the £1,000 threshold is breached, it is possible to deduct this £1,000 instead of calculating the exact expenses.
Contact us
In all cases, the impact of tax planning will be specific to you own personal situation. We therefore encourage you to contact our tax team to discuss your requirements and how we can assist you.
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