Depending on how much you earn, you might need to pay tax on profits received through the rentals juggernaut that is Airbnb. In this article we explain who is liable to pay tax on Airbnb rental income.

Paying tax on holiday lets

Airbnb unites users looking for somewhere to stay with those who are advertising their spare room, caravan, or entire home for rent. It’s often cheaper than staying in a hotel, and there’s an impressive range of the types of place that are available to stay.

For property owners it’s a terrific way to make some extra cash from their home when it’s not in use. The money that you get paid as an Airbnb host still counts as income though, and as such is still liable for income tax.

Airbnb’s terms of service encourage users of their service to be ‘responsible hosts’, and explicitly state that paying taxes is included in this. So, you might be glad to know that the Rent a Room Scheme gives you a tax-free buffer before you have to pay tax on your Airbnb earnings!

How much can I earn through Airbnb before paying tax?

If you qualify for the Rent a Room Scheme, you can earn up to £7,500 in profits each tax year from renting out furnished accommodation, and it is tax free.

The tax exemption for holiday lets is automatic, so if your rental profits are lower than £7,500 in a tax year, you don’t need to do anything. Above £7,500 then you’ll need to opt in for the scheme to be able to claim your allowance.

The key word here is profit! The tax-free allowance for your Airbnb is applied to your profits, not to your income. Deduct your expenses from your earnings to work out profit.

Who qualifies for the Rent a Room Scheme?

The Rent a Room Scheme isn’t just for Airbnb properties, and can be claimed by any resident landlord. There are a few points to consider:

• The accommodation that you rent out has to be part of your main or only home.
• The Rent a Room Scheme only applies to furnished accommodation.
• Holiday lets or renting out a room to a lodger is fine, but if you rent out the space as an office or work, then you won’t be able to claim.
• If Airbnb rental income is shared between you and someone else, the tax free allowance is divided equally between you – so the limit will reduce to £3,750 each.

Learn more about eligibility for the Rent a Room Scheme

How do I pay tax on my Airbnb profits, if I need to?

If your Airbnb profits earn you more than the tax-free threshold, you’ll need to complete a Self Assessment tax return. This tells HMRC how much you’ve earned, so they can work out how much tax you need to pay.

Learn more about Self Assessment tax returns

Want to learn more?

Subscribe to our newsletter to get accounting tips like this right to your inbox

About The Author

Elizabeth Hughes

A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible. Learn more about Elizabeth.

More posts by this author