The rise of both professional landlords, and those wishing to capitalise on spare rooms choosing to host as an Airbnb has risen exponentially over the past few years.
However, thousands of hosts across the UK are being warned that they could face back tax bills and fines if they have failed to declare their income from renting part of their home.
Airbnb Passes on Details of c225,000 hosts income details
After an investigation by HMRC, the short let giant has paid an additional £1.8million in tax, and is now co-operating with them to share data on money made by Airbnb hosts.
The Airbnb UK accounts for the year to 31 December 2019 include a statement that the company will share data with HMRC about the earnings of hosts (those who let out property) on its UK platform in the years 2017/18 and 2018/19. It’s estimated that income details of around 225,000 hosts has been passed on to HMRC.
This means that HMRC will now have information on all transactions through these prior years on how much they have received via the Airbnb booking system.
How many will be affected?
In its latest set of accounts, Airbnb reported that typical annual earnings per host were just £3,100, which lies within in HMRC’s rent a room allowance of £7,500. This means the majority of hosts will not fall under HMRC’s glare.
Another possible bill hanging over Airbnb host could be business rates. If people host a property in England, Scotland, or Wales that’s available to let for 140 days or more per year, the government deems it a self-catering property that’s subject to business rates.
What this means for the UK rental market?
While many may have assumed that making money from short term lets and the associated increased rental values was a rather a free for all, it’s now becoming more clear that the short let market will be better regulated.
Many short let landlords have already turned away from the model as the Covid crisis hit, preferring the somewhat better security of a long term tenancy – although in some locations, domestic tourism is still driving demand.
Indeed Hamptons International reported that 37% of Airbnb stock in London has switched to long term occupation since the end of the first lockdown.
Regulation is key
One of the biggest bugbears for both professional landlords and investors when it comes to short let companies such as Airbnb is the lack of accountability. Not just when it comes to tax activities but also other concerns such as safety.
We firmly believe that having a diverse portfolio is the key to safeguarding your income, and for some, short lettings can always be beneficial – however it’s wise to be very clear on how this fits into your overall strategy – and be clear on the cost vs benefit – as while of course short lets can drive increased rental income, the management and maintenance costs can increase.