Uk tax advise please

Hi,

Im
A new airbnb host in the uk and i am trying to get my head around the tax situation. I read on line that if the property is not my main residence as a furnished holiday let then i dont have to pay tax. Has anyone else got experience of this.

Many Thanks

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I am not a tax expert, I do Airbnb in my own home and pay tax on earnings above the rent a room scheme limit. I see no reason why a holiday let would be tax free after your personal allowance.

I can’t imagine why income from a holiday let would be tax free. Where did you read that ? Unless it was on the HMRC site - it’s unlikely to be true :slight_smile:

You’ll need to speak to your local council about business rates - I think there might be some sort of business rate reduction or exemption, but they will be able to advise you.

Your tax situation will depend on what your other taxable sources of income are.

Thank you for your quick reply. I had tried to contact
hmrc about it but he info they gave was about as clear as mud. Here is the link i was referring to. I think the big difference is if it is either a property which is rented out full time or is a place of residence but is rented out temporarily

https:// www. gov. uk/ government/ publications/ furnished-holiday-lettings-hs253-self-assessment-helpsheet/ hs253-furnished-holiday-lettings-2015

Any experiences you’ve had would be great - It will not let me post the actual link unfortunately

I had a very quick look at the document you reference and couldn’t see where it states if you have a furnished holiday letting you don’t have to pay any tax on the income you generate.

I can’t see why they would do this. I rent out a furnished place on a long term rental and pay tax on it.

Can you quote the relevant section?

If you have multiple sources of income you may want to pay for an accountant for one off advice or to do your accountants for you.

I have a similar but different question and I hope you don’t mind me tagging it along here rather than starting a new thread?

I Airbnb my main (and only) residence, but while the guests are here I am away - either at a friend’s house or camping or whatever. It being my main residence means I am/would be eligible for the Rent-a-room tax allowance of £7500, but do I have to be staying in the property at the time?

Thanks in advance for any help.

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No you wouldn’t be eligible for the rent a room tax scheme as you’re not offering a home share.

You’re offering a whole listing @Scuders

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i know this is an old thread but perhaps someone might be able to offer advice. i currently pay a co host 22.5% and also pay airbnb 15% ( all set up by the co host) and no fees (only cleaning) are paid by the guest. my question is that i never actually see or control the money paid to airbnb and they pay themselves and then pay the co host and myself - what is classed as gross income? i dont see how the full amount paid by the guest can be MY gross income as i dont ever ‘see’ the whole amount, just the amount i receive.

the reason i ask is because when i started this i was paying fees of just 3% and 22.5% and the guest were paying airbnb - so my gross income was the amount paid direct to me via airbnb - which works out more beneficial to me in the long run IF my new gross income is the full amount paid by the guest?

Your gross income is what you receive after Airbnb and cohost fees before you allow for expenses.

Have a look on the HMRC website for more details @Adria

Thanks, I really appreciate your response, though I disagree a little after doing some more research over the last couple of days. It shows in the AirBnB payments that would be/are reported to HMRC are the gross payments made to us are the full payment made by guests initially. I was hoping it would be as you described but I think it’s unfortunately not.

If we were paying tax in the AirBnB income then the discussion would have less important relevance for us and it would be a moot point, BUT we are trying to take advantage of the £7500 threshold below which it falls under the non reportable revenue under HMRC rules. If we start to earn much more above that then it brings all our earnings into scope and a potential 40% tax burden for part of our income.
We have also resolved the 3%/15% issue and instructed our co host to remove us from other platforms

The £7,500 exemption only applies where there is a shared home situation (in general, a lodger). If that is not the case, you are not eligible for the £7,500 exemption at all.

The gross income is indeed the full amount that AirBnb charges a guest; when completing a self assessment tax return you can claim the AirBnb charges (commission) against that gross income thus ultimately resulting in a lower net profit, which is what you will pay tax on.

There are different rules for your local council and HMRC. In order to qualify for business rates exemption (often zero for small properties and no council tax), the accommodation must be available for 140 days a year.

For HMRC, the property must be available for 210 days a year and actually booked for 105 days a year to qualify as a furnished holiday let.

It would be a good idea to establish your status for both the Valuation Office Agency and HMRC;
thereafter there is plenty of information online to help you.

I hope this helps.

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By the by… all income must be declared to HMRC including any below £7,500 shared home income. You won’t be taxed on it, but it should be declared.

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It would have been helpful if you had said up front that you would be using the government home share scheme as my advice would have been very different.

Obviously as this is a tax free scheme for those who home sharers gross profit issues aren’t particularly relevant. If you home share though why would you need a co-host?

If you are likely to exceed the tax free home share loophole and be liable for the 40% tax bracket invest a few hundred and get advice from an accountant .

I stand by my earlier advice re gross and net profits

all good information and advice. i have consulted my accountant and used the gov.uk website to ‘test’ my proposal.

a few other pieces of information - the first was published by the UK Government in their Budget Statement of 2018 = ps sorry about the bold, i am having difficulty with my formatting when copying and pasting

Shared occupancy test for rent-a-room relief – Following consultation on draft legislation, to maintain the simplicity of the system the government will not include legislation for the ‘shared occupancy test’ in Finance Bill 2018-19. The government will retain the existing qualifying test of letting in a main or only residence, and will work with stakeholders to ensure that the rules around the relief are clearly understood.

a further on line article in the FT Adviser

The government has quietly shelved plans to introduce a ‘shared occupancy test’ for people renting spare rooms in their homes.
Hidden within the 2018 Budget documents, the government stated it decided not to include legislation for a shared occupancy test in the Finance Bill 2018/19 in order to “maintain the simplicity of the system”.

Instead, it said: "The government will retain the existing qualifying test of letting in a main or only residence and will work with stakeholders to ensure that the rules around the relief are clearly understood."

HM Treasury had proposed the shared occupancy test for landlords renting their spare rooms in order to continue qualifying for the annual £7,500 rent-a-room tax relief in the summer.

**This would have brought an end to rent-a-room relief for people who rented out a single room in their house while they are absent from the property.strong text

yes, i know it says a ‘spare room’ but the govt HMRC website says it can be as much or as little of your hone

and from Money Saving Expert

If you’re renting a spare room or your whole home, you can earn £7,500 tax-free

This is the doozy. You can earn £7,500 tax-free each year from letting a spare room or your whole home (if it’s your main residence), under the Government’s Rent a Room scheme.

The scheme applies when short-term guests stay in a furnished room or rent your whole property – as long as it is your main home. It also applies if you take a lodger or run a B&B/guest house. It works whether you live in England, Wales, Scotland or Northern Ireland.

In the draft Finance Bill, the Government proposed a crackdown on people who used the tax break when renting out their entire home. Owners would have needed to be present for at least some of the guest’s stay. However, the Government scrapped these plans in the October 2018 Budget.

You currently have two options to reduce tax, though you can only use one of them, not both. So do your homework first. (Tax is paid via your tax return, after you’ve taken the money from Airbnb.)

** The Rent a Room scheme. This is a huge tax break for most people and really ups the gain. You don’t pay tax on the first £7,500 you make each year from renting out furnished accommodation in your home or your whole home (halved if you share the income with a partner or someone else). If your rental income’s below the threshold, you don’t need to do anything, as the tax exemption is automatic.*

If it’s higher, you must complete a tax return – you then opt in to the scheme and pay tax on the remaining amount. For more information, see the Government’s Rent a Room scheme.

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so all the above suggests that we can earn £7500 and dont need to do anything (other than keep records of course) - but i will confirm that before submission - the issue re having to ‘pass an occupancy test’ is no longer valid as it wasnt actually enacted

as with most things ‘taxing’ - if it doesnt say you cant, then you can,. if it does say you can, then you can - if it says you cant then you cant, and as i have yet to find where it says you cant, my money is with the 2021 article published by the Money Saving Expert - for our non UK readers, Martin Lewis is a well known and very public figure who fights for consumer rights, he is regularly on television, hosting his own show where he explains in detail consumer rights and helps people get the best deals on anything financial.

@Scuders - have a look at my (VERY) long post above, you may find it helpful …

it wasnt a case of not telling everything, i had been advised, wrongly it seems, and seen mumerous posts on numerous sites all suggesting the plan to bring in an occupancy test had been enacted and that i didnt come within the scope of the £7500 and so was looking for ways to mitigate tax NOT evade tax, i was waiting for my accountant to respond, which she did with most of the information above.

we do pay our accountant MORE than a few hundred, we have employed her services on an annual basis over the last 7 years for our BTL properties - but she cant (understandably) always respond as fast as i would like her to, i suppose that;s only to be expected.

its a gross income issue not gross profit and i was trying to get my head around whether the money paid to Airbnb was counted as their income or mine, sadly its mine as i have found out, therefore it becomes my gross income earned with the rent a room scheme.

we need a co host because we need someone to deal with bookings and guests when we are not at home ie on holiday - we will only be offering the property during the times we are or can go away. we have had a very constructive meeting with her today and instructed her to remove us from the other platforms (channel manager) as we will not take bookings from any other platform other than AirBnB, which will place us back onto the 3% rate + vat to airbnb and the guests will have to oay the airbnb fees. we worked on spreadsheet to produce lots of different scenarios but effectively it meant that on 15% the guest was saving around £10 per booking (as we had to increase our room rate to account for the additional payments to airbnb) BUT it menat that we could only let for x number of times before we reached 7500, that results in a loss to us (gross earnings) of over £800 off the £7500 less cohosts fees) on an annual basis - something that ISNT going to happen!
as for it being a ‘home share’ scheme, if you read my post above , you might conclude that it isnt? and it definitely isnt or ever would be a ‘holiday let’

@Helsi i hope that has cleared any confusion i might have caused and answered your comments/queries ?

@Fidget - thanks - i just need to clarify that as the GOV.UK site says that i dont need to report it as does Money Saving Expert - but thanks for the ‘nudge’ just to confirm before submission. your other comments are also taken on board, though i am not sure the ‘shared home’ example is relevant, given the information i have posted above.

thanks to everyone who has responded so far and may do in the future, i welcome alternative views because it helps me challenge my thoughts and if necessary change them because i was wrong !!!