With more and more travellers opting for vacation rental accommodation, cities, parishes, districts, counties, states, and countries across the world are opting to regulate short term holiday lets including Airbnb vacation rentals operating within their borders. Holiday lets operating in London, England are also subject to specific laws, regulations, and taxes.
City of London vs Greater London
The financial capital of the UK, the City of London is a city, ceremonial county, and local government district 2 sq.mi. in area that is known as ‘the Square Mile’. It falls under the jurisdiction of Greater London. However, it also has its own government and mayor – Lord Mayor of London.
Greater London is the capital of the UK. It is also a county that incorporates 32 boroughs as well as the City of London. It governs via the Greater London Authority (GLA), which consists of the Greater London Assembly and the Mayor of London.
Short Term Holiday Let Rules in London
Planning Permission
Under many circ*mstances, short term vacation rentals are considered to be a change of use of the home and hosts are required to obtain planning permission in order to operate. The permit changes the purpose of the property from residential to commercial, allowing for it to be let for a longer period of time.
Hosts renting out a part of their home as a short let do not require a permit but are expected to live on the property during the rental.
Hosts renting out entire homes as a short let must obtain planning permission prior in order to operate. They are exempted from this requirement if they only rent their home for a total of 90 days or less in a year and are categorised as temporary sleeping accommodation.
Because approval of permit applications can take weeks, it is recommended that hosts obtain permission long before the 90-day limit is up.
Those who do not obtain necessary permission are liable for large fines.
Other Permissions
Long term renters can also host short let accommodations but must first obtain permission from their landlord.
If the property listing is a leasehold, the host must get permission from the freeholder.
Hosts who have a mortgage must obtain permission from the mortgage provider. (A residential mortgage holder may have to switch to a buy-to-let mortgage to qualify.)
Hosts must also check with their insurance provider or risk having their home insurance become invalid due to the change of use of the property.
Other Host Obligations
Obtain a gas safety certificate for the property
Carry out a fire risk assessment annually
Make sure a smoke detector and a carbon monoxide alarm are installed in the property.
Let their guests know important information like where the trash bins should be placed and when, what items can be recycled and their management, noise level, and behavioural expectations in the area.
It is advisable for Airbnb and other self-catering rental hosts in London to maintain a log of visitors and other activity in their property which can act as documentary evidence in case of a serious issue later on.
Airbnb Tax in London
Income earned from hosting a short term holiday let accommodation, like other forms of income, is subject to tax. However the tax treatment can differ depending on the type of property you are renting. That is if you are:
Rent A Room
If you rent a furnished room or rooms within your main residence you can qualify for the Rent A Room scheme. This applies even if you don’t own the house or flat you reside in and are letting for the short term. However you don’t qualify if you rent out the space to be used as an office, even if it is for the short term.
The rent a room scheme provides you with a tax-free allowance of £7,500.
The allowance is on gross receipts (prior to deducting expenses) rather than profits.
If your gross receipts amount to less than £7,500 in a tax year, you are not obligated to even declare it as a tax return as the income is exempt automatically.
If two people receive income from letting the same property, the tax allowance for each person is halved, amounting to £3,750.
If your gross receipts are more than £7,500 you can choose to simply pay tax on the net profit from your rental depending on what suits you better.
Furnished Holiday Letting
If you are renting a separate property from your primary residence as a short term holiday let, you don’t qualify for the rent a room scheme. However, you may qualify as a furnished holiday letting which offers its own set of tax and other advantages.
To be eligible as furnished holiday letting, your short let must be:
Advantages stemming from being eligible to be furnished holiday letting include:
Capital gains tax relief such as Entrepreneurs’ Relief, Rollover Relief, Gift Hold Over Relief, etc
Because rental profits are considered earned income, you can pay more into your pension scheme
Capital allowances for furniture, fixtures, and equipment in the property you are renting out
Section 24
If your self catering rental does not qualify as a furnished holiday letting, it will be subject to Section 24 interest relief restriction. This means you cannot claim relief on mortgage interest if you are a higher rate taxpayer.
VAT
If the total income from your short term holiday let accommodation exceeds £85,000, you will have to charge VAT at 20% from your guests. VAT is based on the total fee incurred by the guest including booking, cleaning, etc.
You will need to register for VAT and file regular VAT returns.
However there are some exceptions. For example, if a guest stays for over 28 days, you may be exempt from charging VAT. Because of the complicated rules governing VAT, it is always advisable to consult with a property accountant.
Council Tax
If your short term holiday let accommodation property is rented out for less than 140 days in the tax year, it precludes the host from paying business rates. Rather, you must pay council tax for the number of nights the house has been let.
London Vacation Rental Listings on Airbnb
Airbnb sets limits of 90 days a year for listings of entire homes in London. Once a listing has received 90 nights of bookings for the calendar year, the system automatically blocks the listing from being booked for dates in the rest of the year. A counter on the Manage listing page will display the number of nights the listing has been booked for that calendar year. It will refresh at the beginning of the calendar year.
Hosts who have obtained planning permission to list their entire homes for longer than 90 days a year can ask Airbnb to remove the limitation by claiming an exemption on the Regulations tab. Once the process is completed, the tab will say “The 90 night limit has been removed from your listing”.
Future Regulations
A new government review looking at the impact of increases in short term and holiday lets in England may result in new rules governing Airbnb. Measures being considered include conducting physical inspections to ensure compliance with health and safety, noise, and antisocial behavior regulations; spot checks for concerns such as gas safety; and hosts registering on a self-certification scheme prior to commencing operations.
FAQs
The residential rental income is exempt from the VAT in the UK. However, Airbnb is classified similar as hotels rather than typical buy-to-let residential letting. Airbnb falls within the definition of holiday accommodation and so standard rated. This means you need charge VAT at 20% on the rent you charge your lodger.
Do I have to pay taxes on Airbnb income? ›
Airbnb, HomeAway, VRBO, FlipKey and similar companies are required to withhold 28% of your rental income if you don't provide them with a W-9 form. In most cases, the tax on your rental income will be less than 28%.
Are there restrictions on Airbnb in London? ›
Airbnb hosts in London cannot rent their property for longer than 90 days a year. This restriction applies to both 90 days in a row or 90 days throughout the year.
How much tax does Airbnb pay UK? ›
A 10% capital gains tax rate instead of 28% when you sell your property under the Entrepreneurs' Relief scheme. The ability to defer capital gains tax on the sale of your initial property when you sell one Airbnb residence and buy another under the Rollover Relief scheme.
Do I need to declare my Airbnb income UK? ›
In general, any money you earn as a Host on Airbnb is considered taxable income that may be subject to different taxes like income tax, business rates, corporation tax or VAT. You can see what you have earned in your Host earnings summary. Tax forms for the United Kingdom are due by 31 January each tax year.
Do I need to report Airbnb income UK? ›
In most cases, yes. The money you make through Airbnb is considered taxable income if you host as an individual rather than a limited company. As long as your taxable income goes over the personal allowance, which is £12,570 for each year between 2022/23 and 2025/26, you will be charged at your marginal tax rate.
How much can I earn on Airbnb before tax? ›
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.
What taxes do you pay as Airbnb host? ›
Any Host with US listing(s) who provides Airbnb Form W-8BEN (for individuals) or Form W-8BEN-E (for entities) will be subject to 30% US withholding tax on payouts on their US listing(s).
How does tax work for Airbnb? ›
We automatically collect and pay occupancy taxes on behalf of hosts whenever a guest pays for a booking in specific jurisdictions. Hosts may need to manually collect occupancy taxes in other jurisdictions and in certain listed jurisdictions where Airbnb does not collect all applicable occupancy taxes.
How many days a year can you Airbnb in London? ›
What is the 90-day limit? In January 2017, Airbnb introduced a 90-day limit on 'entire home' listings in the Greater London area now commonly known as the '90-Day Airbnb Rule'. This means a property can't be let out on Airbnb for more than 90 days of occupied nights per year.
You need planning permission if your property is in London and you allow it to be used for short term letting for periods that add up to more than 90 nights during any calendar year. The law considers that this is a material change of the use of your property.
How do I get around Airbnb 90 day rule London? ›
There are a few options that you can choose to work within the rules. The first is renting your Airbnb as a short-term let on the platform and then, once you have reached the 90-day limit, turning your listing into a medium or long-term rental. If you indicate to Airbnb your listing is a '90+ days' rental.
Do Airbnb report to HMRC? ›
Paying Tax on Airbnb Income
Airbnb has shared data with HMRC on the earnings of hosts for its platform covering 2017/18 and 2018/19 and HMRC is expected to address any issues over hosts' payment of tax in 2021/2022. We cover this in a separate article here.
Do I need to register my Airbnb as a business UK? ›
Business License
Some places in UK require the host to obtain a license to operate first. In London for example, the “90 night rule” restricts hosts from renting out their property for more than 90 days as this is considered a “change of use”. Some boroughs have exceptions to this rule, so check first.
Is Airbnb a good way to make money UK? ›
Airbnb hosting is one of the most profitable ways to make an extra income compared to other shared economy workers. Hosts make an average of £670 a month renting their spare rooms or properties compared to other ventures which fall under the same umbrella. For example, an Uber worker makes an average of £275 a month.
What happens if you don't declare rental income UK? ›
What happens if I don't declare rental income? If HMRC suspects a landlord has been deliberately avoiding tax, it can reclaim 20 years' worth of tax payments. They can also impose fines up to the total value of any unpaid tax, as well as the underpaid tax.
What Airbnb expenses can I deduct UK? ›
If you're hosting a stay, it's possible that not all of your Airbnb income is taxable. Deductible items may include rent, mortgage, cleaning fees, rental commissions, insurance, and other expenses.
Is Airbnb considered self-employment UK? ›
Is Airbnb Considered Self-Employment? No, an Airbnb host doesn't have to consider themselves as self-employed. It's easy to confuse because an Airbnb host is hoping to make money. Just like anyone who is self-employed and runs their own small business, HMRC and Airbnb hosting is considered the same.
Is running an Airbnb classed as a business? ›
If you offer accommodations as a company or sole proprietor in the offline world, then your hosting activities on Airbnb will most likely also constitute a business activity. You also typically act as a professional if you regularly host on Airbnb over a longer period of time in order to make a profit.
What is the 90 day rule on Airbnb? ›
You can rent a portion or your entire unit while you are not present for a maximum of 90 total nights per year. But you must register your unit and pay $250 fee (can also be done directly through Airbnb). Violators are subject to fines of up to $1,000/day, and Airbnb is now removing non compliant listings.
To declare your income, you'll need to register for and submit Self Assessment tax returns. All your earnings (including what you earn from your employer) must be declared in your Self Assessment tax return.
How to start Airbnb business UK? ›
What do I need to consider before setting up an Airbnb business?
- Safe and suitable. Make sure your place or experience is suitable and safe for guests, including children and pets (if you choose to offer those options). ...
- Being around. ...
- Availability and communication. ...
- Cleaning. ...
- Maintenance. ...
- Adapting your home.
You might list your home when you travel, rent out a private room or even operate a second property as a vacation rental on Airbnb. However, it's important to remember that running an Airbnb is a business venture, so there are also tax responsibilities that come with renting out your home on one of these sites.
Do you need business permit for Airbnb? ›
Registration. Like any other business, you also need to secure a registration permit and make sure that you are allowed to host in your home.
Is Airbnb passive income? ›
With Airbnb short-term rentals, you don't have to work like an employee. Short-term rentals are passive in nature, which means that if you have a property, you can still earn even if you're not around.
Do Airbnb hosts have to file taxes? ›
Airbnb Hosts
The US Internal Revenue Service (IRS) requires US companies that process payments, including Airbnb, to report gross earnings for all US users who earn over $20,000 and have 200+ transactions in the calendar year. If you exceed both IRS thresholds in a calendar year, Airbnb will issue you a Form 1099-K.
Do Airbnb guests pay tax? ›
In areas that Airbnb has made agreements with governments or is required by law to collect and remit local taxes on behalf of hosts, Airbnb calculates these taxes and collects them from guests at the time of booking. Airbnb then remits collected taxes to the applicable tax authority on the hosts' behalf.
Does Airbnb count as rent for taxes? ›
Income from rental operations, such as short-term rentals and Airbnb, is usually income from the property. Therefore, just like all other income you earn, when you earn rental income from renting your property, you need to report the gross rental income and related expenses on your tax return.
What are the rules for Airbnb UK? ›
The new rule to the London Airbnb limit means that any property on the Airbnb books can now be let for 90-days or nights or less in any 12 monthly calendar period. When the so-called limit has been reached, Airbnb will automatically close all bookings for that particular property until the following calendar year.
Can you live in an Airbnb long term UK? ›
Fully furnished rentals include a kitchen and the amenities you need to live comfortably for a month or longer. It's the perfect alternative to a sublet. Special rates for longer stays and a single monthly payment without additional charges.
This depends on how the property is being used as there may be a breach of planning regulations. If the guests are causing a nuisance or excessive noise, this can be referred either to the local authority or to the courts and may also be enforceable through the restrictive covenants affecting the property.
Do I need a licence to rent out my property in London? ›
If you landlord is renting out a property without the required property licence, they are committing an offence. Your landlord may also be committing an offence by breaching the terms of their licence (for example by renting it out to too many people, behaving abusively to tenants or refusing to make urgent repairs.
Where does the 90 day rule apply in London? ›
The 90-day rule applies to any short-term let where someone pays to stay in the property. This includes Airbnb lets, holiday lets, serviced accommodation, or someone renting out their home for visitors to, for example, go to sporting or cultural events like Wimbledon, football tournaments or concerts.
Can I Airbnb my rented flat UK? ›
Most landlords consider it to be subletting and generally they don't like - or allow it - whether it's via Airbnb or just to mates, so tenants need to get their landlord's permission first. Most rental contracts prevents tenant subletting.
What is the longest you can rent an Airbnb for? ›
Additional guidelines
- Payments for stays longer than 28 days work in a different way. Airbnb automatically collects from guests 1 month upfront and at the beginning of each 30 day period. ...
- Stays longer than 28 days are subject to our Long-Term Cancellation Policy. ...
- Know your local laws and regulations.
Night limits for hosting
Once you reach your city's 120 night limit, you won't be able to accept short-term reservations for the rest of the calendar year. If you plan to host your primary residence for more than 120 days per calendar year, you'll need to apply for extended home-sharing.
How many days a month can you rent on Airbnb? ›
What Are Airbnb Monthly Stays? According to Airbnb, a short-term stay is when a guest books a short term rental for a minimum of one night up to a maximum of 28 days. As such, any stay that extends for 28 days or longer is regarded as a long-term or monthly stay.
What taxes do you pay for Airbnb? ›
Airbnb Service Fees are Business Expenses
You can use the data on that form to calculate your income and self-employment taxes. Note that you must fill out a W-9 form when you first start acting as an Airbnb host. If you do not do so, the company will need to withhold 28% of your income in taxes.
Do you pay VAT on Airbnb UK? ›
United Kingdom. If you are a customer in the United Kingdom, Airbnb service fees are subject to 20% VAT. If you are registered for VAT or your stay is for business, you may not be charged VAT on Airbnb service fees but you may be required to declare VAT on your VAT filing.
How much tax do you pay on rentals UK? ›
Less than the basic rate threshold of £12,570 – you'll pay 0% in tax on rental income. Above £12,570 and below the higher rate threshold of £50,270 - you'll pay 20% in tax on rental income. Above £50,270 and below the additional rate threshold of £150,000 – you'll pay 40% in tax on rental income.
Income Tax rates and bands
| Band | Taxable income | Tax rate |
|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £150,000 | 40% |
| Additional rate | over £150,000 | 45% |
Any Host with US listing(s) who provides Airbnb Form W-8BEN (for individuals) or Form W-8BEN-E (for entities) will be subject to 30% US withholding tax on payouts on their US listing(s).
How does tax work with Airbnb? ›
We automatically collect and pay occupancy taxes on behalf of Hosts whenever a guest pays for a booking in specific jurisdictions. Hosts may need to manually collect occupancy taxes in other jurisdictions and in certain listed jurisdictions where Airbnb does not collect all applicable occupancy taxes.
How much does Airbnb charge to clean UK? ›
Per-hour services for regular Airbnb cleaning range from £13 to £40 per hour. Deep cleaning is essential, especially when different guests occupy your place. It is advisable to seek this option at least once every two weeks to clean unreachable areas.
How do I avoid tax on rental income UK? ›
Tips on How to Reduce Tax on Rental Income
- Recent tax changes for landlords.
- Claiming all expenses.
- Creating Joint Ownership.
- Form a limited company.
- Reducing through Extending.
- Short-term Tenants.
- Utilizing all available tax-bands.
- Utilize mortgage interest by changing to an offset buy-to-let mortgage.
Penalty Position
Where a landlord has failed to notify HMRC of their rental property income, the unprompted penalties can range from 10-30% of the tax due, where this is deemed to be a non-deliberate error. This rises to a minimum of 20% where HMRC have prompted the taxpayer to make the disclosure.
What happens if you don't declare rental income? ›
What happens if I don't declare rental income? If HMRC suspects a landlord has been deliberately avoiding tax, it can reclaim 20 years' worth of tax payments. They can also impose fines up to the total value of any unpaid tax, as well as the underpaid tax.
Do foreigners pay tax in London? ›
Your UK residence status affects whether you need to pay tax in the UK on your foreign income. Non-residents only pay tax on their UK income - they do not pay UK tax on their foreign income. Residents normally pay UK tax on all their income, whether it's from the UK or abroad.
What is the tax-free in London? ›
From 1 January 2021, the UK government ended tax-free sales in airports, ports and Eurostar stations. This means you cannot buy tax-free goods such as electronics and clothing if you are travelling to non-EU countries. VAT refunds for overseas visitors in British shops have now been removed.
Do you get taxed in London? ›
Income tax is charged at graduated rates, with higher rates of income tax applying to higher bands of income. Tax is charged on total income (from all earned and investment sources) less certain deductions and allowances. The main allowance is the personal allowance, which is GBP 12,570 in 2021/22.
