It was only ever going to be a matter of time before the taxman got his claws into Airbnb. After all, eBay sellers have been on his radar for years. Well, now it’s time for professional and ad hoc Airbnb hosts to cough up too.
That’s because, as part of a deal with the online letting giant, the UK Treasury was given the names of 225,000 Airbnb hosts. The company itself was also forced to hand over £1.8m in tax fees. That’s in addition to the £5.6m it declared as tax for 2019.
Many Airbnb landlords won’t have to pay tax
Not all Airbnb hosts will be due to pay tax on their earnings. Some may fall within the Rent a Room category, for instance, and where it’s possible to earn up to £7,500 without having to be pay tax. Airbnb itself says the majority of its users earn around just £3,100 a year.
For those that may exceed the threshold, HMRC say they will go back at least a couple of years. That means looking through the records for the tax years 2017-18 and 2018-2019.
Many tax analysts are recommending hosts eligible for tax ‘own up now.’ That way they could avoid further fees, such as interest and penalties for late payment since HMRC may possibly take this ‘quick rectification’ into account.
HMRC can investigate up to two decades of accounts
HMRC can, in fact, investigate tan individual’s tax/business accounts for the past four years if it believes an ‘innocent error’ was made. For a ‘careless’ declaration’ it will go back six years. For international affairs it can be 12 years for an ‘innocent mistake’ and 20 years for ‘failure to notify.’ Deliberate acts of underpayment can result in criminal action being taken.
A spokesman for HMRC said: “People with additional income streams may not be fully aware of their tax obligations and so we have taken steps in HMRC to consider sectors, such as short-term property letting, where we may not be collecting the full amount of tax owed.”
He added: “We would encourage customers to check their tax affairs, seeking advice where necessary, in order to put right any honest mistakes or omissions.”
Airbnb landlords may be charged business rates
Those that don’t have to pay tax on their Airbnb earnings may have to look out for being charged Business Rates, however. These apply in England, Scotland and Wales if property is rented out for at least 140 days a year. These are based on number of beds available and overall size of the property, as well as its location.
Other exemptions for Airbnb tax include:
- Rental income for the year is less than £1000
- Total income for the year – including employment – falling below the Personal Allowance (£12,500 for 2020/21)
Airbnb and other ad hoc landlords not familiar with the tax structure of property are always advised to contact an accountant specialising in the subject for further clarification.