U.K. Tax for AirBnB hosts? Property or Holiday Let?

Hello Folks,

I’m doing my u.k. tax return and wondering if I should declare my AirBnB earnings as ‘income from property’ or go down the ‘furnished holiday lettings’ route. It seems like there’s a case for either. What do other u.k. hosts suggest?

Thanks

Simon.

Not a UK host, but this advice is international:

Get a good accountant. Come here for local accountant/vendor referrals, but no one here can make that decision for you without incurring massive liability if “they” get it wrong and you owe money - or worse.

2 Likes

I agree with @casailinglady 's sage guidance here. I would only rely on an accountant for tax advice, a licensed lawyer for legal advice.

You might want to get up to speed yourself. If so, here is a document that seems to be dated in 2018 (so much could have changed). See the whole thing, which has a link to something you might find useful. https://assets.airbnb.com/eyguidance/uk.pdf

BTW they (E&Y) say:

Rental profits in the UK are generally regarded as investment income but where a property qualifies as a ‘Furnished Holiday Let’ (FHL) then some of the tax advantages normally only available for trading businesses may be claimed. In view of the conditions which must be met to qualify for this treatment it is unlikely to be available in relation to a property occupied by a host as their private residence but may be applicable to hosts who receive rental income from a second home.

You might also look here: Responsible hosting in the United Kingdom - Airbnb Help Centre

This is dated 9/21, looks VERY useful: https://assets.airbnb.com/help/airbnbn-tax-guide-2021-united-kingdom-en.pdf

It seems clear that. you want to take the furnished holiday lettings route if you qualify. See here: HS253 Furnished holiday lettings (2021) - GOV.UK

Hello @SimonInBrighton

UK host here - it depends is the answer. I too would suggest you get an accountant to help you file your first tax return.

Hi Helsi,

Thanks

What do you do? Declare your Airbnb earnings as income from property? Or is your Airbnb a holiday letting?

All the best

Simon.

Neither I’m a homeshare host :slight_smile: for STRs but I do have long term rentals under property income.

I don’t understand why you keep asking this question.

If you qualify to treat it as a letting, you get tax benefits you otherwise don’t get.

How can you say it’s a case for either? Please explain.

I know what he means as I’m from the UK - it depends on whether the property qualifies as a holiday letting or not. Not all STRs do. @HostAirbnbVRBO

No that’s not the case. Everyone qualifies for tax relief but it depends on how you have set up your STR as to what sort of tax relief you can claim

Exactly. But if you do qualify you get additional tax benefits. So, if someone were to qualify for the additional tax benefits I don’t see the case for not doing so. So the question is whether you qualify and the links I provided go through that step by step.

No you will not get extra tax relief as a holiday let necessarily . You will get tax relief whether it’s a holiday let or an investment property as income from a property.

You get tax relief either way, but potential for additional tax benefits if it is an FHL.

If you let properties that qualify as FHLs:

  • you can claim Capital Gains Tax reliefs for traders
  • you’re entitled to plant and machinery capital allowances for items such as furniture, equipment and fixtures
  • the profits count as earnings for pension purposes

These benefits aren’t available for other rental properties.

Thanks but I do know how the tax laws work in my own country @HostAirbnbVRBO

Not quite sure as a US host why you’re trying to tell me how our tax system works .

As I’ve already explained multiple times there are tax advantages and disadvantages for both holiday and investment rentals.

1 Like

Really? What is the potential disadvantage of the FHL, because there is nothing in the literature I see that suggests that.

I don’t want to be argumentative but I don’t see where before this one time you said even once that there was a disadvantage for an FHL.

Yes, I’m a US Host but I can read. I don’t live in the Southern hemisphere and I can still know that it’s autumn there while it’s Spring here, and that water circles the drain counterclockwise there, clockwise here. So I think it’s legitimate for me to report on what I’m reading.

All this in response to the OP unexplained comment that there was a case for either FHL or non-FHL rental property , where it seems clear to me that if you qualify for an FHL that you would take those additional benefits that can apply. I see no downside.

We do agree that the OP should see its accountant if the OP wants advice. No one is giving advice here. If the OP is taking a DIY approach, as many in the US do with their taxes I was curious why the OP thought that there was a case for not going the FHL route when qualified to do so. Neither you nor the OP has explained that.

You appear to be assuming that the OP’s “seems like there is a case for either” means he is so dumb that he wouldn’t do what is to his advantage tax-wise.

That is not how I read his statement. I think he is unclear on what the appropriate legal category for his rental would be.

1 Like

Well, I certainly didn’t imply anyone is ‘dumb’ (which, BTW, should not be used as a synonym for ‘stupid’).

I simply sought an explanation rather than to make any assumption.

IF the OP is unclear on what category its rental falls in, the last link I provided shows the steps. If any one of those is confusing then I suggest the OP say that.

Here’s what that says in part:

Accommodation that qualifies as a FHL

To qualify as a FHL your property must be:

  • in the UK or in the European Economic Area (EEA) – the EEA includes Iceland, Liechtenstein and Norway
  • furnished – there must be sufficient furniture provided for normal occupation and your visitors must be entitled to use the furniture

The property must be commercially let (you must intend to make a profit). If you let the property out of season to cover costs but did not make a profit, the letting will still be treated as commercial.

All your FHLs in the UK are taxed as a single UK FHL business and all FHLs in other EEAstates are taxed as a single EEA FHL business. You will need to keep separate records for each FHL business because the losses from one FHL business cannot be used against profits of the other.

Occupancy conditions

Accommodation can only qualify as a FHL if it passes all 3 occupancy conditions.

How to use the occupancy conditions

For a continuing let, apply the tests to the tax year – that’s from 6 April one year, to 5 April the next year.

For a new let, apply the tests to the first 12 months from when the letting began.

When your letting stops, apply the tests to the 12 months up to when the letting finished.

The pattern of occupation condition

If the total of all lettings that exceed 31 continuous days is more than 155 days during the year, this condition is not met so your property will not be a FHL for that year.

The availability condition

Your property must be available for letting as furnished holiday accommodation letting for at least 210 days in the year (140 days for the tax year 2011 to 2012 and earlier).

Do not count any days when you’re staying in the property. HMRC does not consider the property to be available for letting while you’re staying there.

The letting condition

You must let the property commercially as furnished holiday accommodation to the public for at least 105 days in the year (70 days for the tax year 2011 to 2012 and earlier).

Do not count any days when you let the property to friends or relatives at zero or reduced rates as this is not a commercial let.

Do not count longer-term lets of more than 31 days, unless the 31 days is exceeded because something unforeseen happens. For example, if the holidaymaker either:

  • falls ill or has an accident, and cannot leave on time
  • has to extend their holiday due to a delayed flight

If you do not let your property for at least 105 days, you have 2 options (known as elections) that can help you reach the occupancy threshold:

  • the averaging election – if you’ve more than one property
  • a period of grace election – if your property reaches the occupancy threshold in some years but not in others

Well folks; I came to this forum to gain the benefit of other people’s experience in hosting, but I have to say, so far I’m finding the tone a bit adversarial.

The reason I see it as potentially a double edged sword to position my hosting as a furnished property letting, is that whilst it’s clearly more tax efficient, as far as I can see, it would attract business rates and thus would need to be a business rather than, as at the moment, just an aspect of a private individual’s tax self-assessed tax affairs. Forming a company isn’t a huge thing to do, I’ve done it before, but it does involve quarterly tax returns and the property would need to be an asset of the company, so there would be a change of deed and hence stamp duty to pay.

So, I wanted to hear from U.K. hosts who have used both approaches and ask whether they felt the case was strong either way. I’m not looking for advice; tax or legal advice, just people’s reflections on their relevant experience.

Respectfully, feel free not to express a view, if you haven’t been down this particular road.

All the best,

Simon.

4 Likes

Good that you clarified. But it seems that other hosts’ experience might not be that relevant to you, as wouldn’t it depend on your own earnings? A host whose str income was a lot higher or lower than yours might find one or the other classification to be more financially advantageous. It seems like it’s a matter of crunching the numbers for either scenario, according to your average str income. And of course, while one or the other might be a better option for you, if you count your time as worth money, and for instance, you do your own taxes and filing as a company would require you to fill out forms and file 4 times a year rather than once a year, that’s a financial consideration to add to the calculations as well.

This could apply in many parts of the world, not just the UK. I live and host in Mexico, and have always done my taxes myself- I had to file bi-monthly and it took me about an hour. But Airbnb started collecting taxes on behalf of hosts here, and withholding those amounts, releasing only a portion of them to hosts each month, and issuing tax statements to hosts that I can’t make heads or tails of, and on top of that, the Mexican tax dept. revamped their entire system this January, it’s much more complex, and requires monthly, rather than every 2 month filings. So it was more financially advantageous to me to hire an accountant than struggle over it for hours every month.

2 Likes

Oh, I wish I had thought of that. Brilliant! :wink: