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01 March 2023

Tax Implications of Airbnb

Q : I live on my own and I am considering renting out a spare room on Airbnb to help with the current cost of living crisis and rising inflation. What are the tax implications of this?


As a general rule, you will need to pay income tax at the usual rate on money earned from hosting on Airbnb. Your actual tax bill will depend on a few things:

  • Whether or not you also live on the property;
  • How much you earn from it;
  • How many days you’re letting rooms out/hosting.

You have said that you plan to rent out two of the rooms in your own house. This will make the tax rules different for you than if you were letting out an investment property. As long as you also live in the property, if you earn under £7,500 from Airbnb, this shouldn’t count as taxable income so you don’t need to do anything. This tax relief is given under the Rent a Room Relief.

What is Rent a Room Relief?

The Rent a Room scheme allows you to earn up to £7,500 a year tax-free from renting out a part of your own home, as long as you also live there. If what you earn from renting out the room is less than £7,500, you don’t even need to declare it to HMRC. It’s tax-free. However, if you make more, you still have to file a Self-Assessment tax return, but you can claim £7,500 as a flat tax-free allowance.

If you are letting out a property on Airbnb that is not your home then the Rent a Room scheme will not apply. Therefore, you will be taxed just like a regular landlord:

  • You’ll pay income tax on Airbnb earnings minus allowable expenses (or the flat £1,000 property income allowance – whichever works best for you).
  • If your income from Airbnb is higher than £85,000, you’ll need to register for VAT.
  • If your property is available to let for 140 days or more, it will also be subject to business rates.

Tax advantages of letting on Airbnb

HMRC class letting property on portals such as Airbnb as Furnished Holiday Lets and this comes with some significant tax advantages. You must meet the following criteria:-

  • The property must be let for at least 105 days in the tax year;
  • The property must be available for letting for at least 210 days in the tax year;
  • It must not be let to the same person/organisation for more than 31 days without a break.

If your property qualifies as a furnished holiday letting, you’ll luckily be entitled to a few tax reliefs and advantages:

  • Business Asset Disposal Relief – a 10% capital gains tax rate instead of the usual 28%;
  • Rollover Relief: if you sell one Airbnb residence and buy another, you can defer Capital Gains Tax on the sale of the initial property;
  • Capital allowances for property furniture and fittings;
  • Your Airbnb profits may even count as earnings for pension purposes.

Regarding capital allowances, fixtures and fittings are eligible for capital allowances from day one. This is in contrast to buy-to-let properties, where fixtures and fittings are generally only allowed as replacement costs. What constitutes a fixture and fitting is a specialist area of tax and in some cases everything from boiler systems, electrical wiring to door hinges nuts and bolts is classed as fixtures and fittings. The capital allowance claim can therefore be very substantial resulting in no income tax for a number of years. It definitely pays to get specialist tax advice in this area.

There are lots of tax rules that apply to properties and as you can see there are different tax implications for renting a room in your house to renting an investment property on Airbnb as opposed to a traditional buy to let and in all cases specialist advices should be taken.

Get in touch

If you have any further queries regarding the tax implications of letting on Airbnb, contact our tax team today.

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Contact Malachy

Malachy McLernon / Tax Partner

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