How is Airbnb taxed?

The issue

Airbnb is now a fundamental part of the short-term letting industry. Broadly it works by using the internet to secure a house (or even just a single room) for a few nights. Some property owners use Airbnb as an alternative letting model, whereas others use it to generate funds from their property while they are not there (or even when they are). Many Airbnb letters (and especially the infrequent ones) will not be familiar with the tax issues around an Airbnb business model. The tax rules for Airbnb letters are not straightforward and will be different depending on the type of letting involved.


Furnished holiday lets

It is well worth making your Airbnb a furnished holiday let (FHL) if at all possible. The following conditions would need to be met here:

  1. The property must be available for 210 days (30 weeks),
  2. The property must be let commercially as a holiday property for 105 days (15 weeks)
  3. If the property is occupied for more than 31 days by the same person/people, there must not be more than 155 days (total) of such longer lettings.

There is a much wider range of deductions available for FHLs compared to normal lettings. For example, the unpopular interest restrictions that exist for normal lettings do not apply to FHLs. However, time spent in the property by the owners can never be treated as ‘available time’ and so FHL status is unlikely to be achieved for an individual’s main residence.


Rent-a-room relief

Letting part or all of your home while temporarily absent will be tax exempt if the income received is no more than £7,500. This exemption applies per property and not per person. Furthermore, if the total rental income exceeds £7,500 then you can choose to deduct either the actual letting-related costs or the rent-a-room relief amount.


Final comment

Airbnb has probably made it far easier for the average property owner to access the holiday rental market on a small or medium scale. Although most will consider the tax implications (hopefully!) after they have started the rental activity, in some cases the tax implications could actually be a driver.  For some moderate letters the prospect of £7,500 of tax-free income would be a very attractive prospect and one that may have been difficult to secure practically before Airbnb.




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