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  • 4 min read
  • 19 Jun 2020
Women on Phone in AirBnb

Owing to the pressures of the globe locking down in the COVID-19 pandemic, lots of you who host on Airbnb have been scrambling for ways to keep your host income coming in. And who can blame you? 

Within just a month of the crisis, the UK GDP declined by a whopping 5.8%. Putting this into context (because who really understands GDP-based scandals?), over 13 whole months of the financial crisis in 2008, our GDP declined by just 6.9%. And at the time, that was significant.

What’s actually happened?

In April 2020, Airbnb announced that they would be refunding all guests in full who had booked stays with check-ins between 14th March – 31st May 2020. As you can imagine, that was a lot of bookings. This move also circumvented any cancellation policies that were in place for host protection. As a result, hosts who used the Airbnb platform to help them with mortgage payments were dealt a hard blow. 

The hardest hit have probably been those who host short-term stays. Whilst we’ve all been stuck indoors, no one’s been booking weekend breaks which has prompted a lot of hosts to hunt for other options. 

CNBC reported that hosts have been using other sites to list their space and have had to change their business models to accommodate the new climate. The short-term rental has become the new staycation.

Support from Airbnb 

Back in March, Airbnb sent an open letter to Congress urging them to consider emergency legislation to provide “economic relief for American workers with income streams interrupted by this crisis.” 

The USA passed a bill later on in April which provided a £391 billion fund for small businesses, hospitals and testing. Unfortunately, this still left a lot of hosts struggling. In the UK, we’ve had the furlough scheme and the Self-Employment Income Support Scheme (SEISS) – but, as with the USA, many of us are still in need. 

Airbnb also set up a $250m relief fund to help to support hosts who were dealing with cancellations. It enables them to claim up to 25% of their usual cancellation compensation for guests that cancelled during the period we mentioned earlier. 

Despite these measures, many hosts are still resorting to other options during the pandemic-induced down time. 

What are the tax changes if I rent out my room?

In the current climate, a lot of hosts have temporarily switched their business model to accommodate short-term rentals instead of business/leisure stays. 

If that’s you, here are four tax implications to be aware of:

1. Rent-a-Room

If you’re just renting a room in your house (and you’re also living there), you’ll qualify for the Rent-a-Room scheme. You can earn up to £7,500 of rental income a year tax-free and you won’t need to complete a Self Assessment. Anything over £7,500, you’ll have to complete a Self Assessment, but you only pay tax on the excess.   

2. Income Tax

If your Airbnb is a second home or a property that you don’t live in, your tax-free allowance for annual rental income is lower. You can earn up to £1,000 per year in rent before you have to start paying income tax on your earnings. 

Any rent earned in excess of £1,000 must be added to your total yearly earnings when you do your Self Assessment – and then Income Tax is deducted from the total at the rate of your income band. 

In case you’re not sure, here are the thresholds for Income Tax for the 2022/23 tax year:

IncomeTax rateBand
Up to £12,5700%Personal Allowance
£12,571 to £50,27020%Basic Rate
£50,271 to £150,00040%Higher Rate
£150,000 +45%Additional Rate

Check out our rental income calculator to calculate what you owe. 

3. Expenses

One of the benefits of the buy-to-let model is that you can claim expenses for maintaining your property. You can claim a tax relief on your mortgage interest and any of the following expenses:

4. Business rates

Finally, don’t forget that if you’re renting your property for more than 140 days in a year, you’ll be liable to pay business rates – essentially a bit more on top of your council tax.

Read more about how business rates are calculated on the HMRC website. 

Need to do a Self Assessment? We can help you out. Click here to get started now.

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