Many people will be aware of Airbnb, the online community marketplace for people to list accommodation and to invite guests to stay. Indeed, Airbnb (www.airbnb.co.uk) suggests that it has assisted more than 9,000,000 guests with their stays away from home and its success and take up is incredible. Whilst we understand that tax would not be at the forefront of most of the UK Hosts’ minds, there are a few things to bear in mind which might ease the worry of the taxman calling.
Although not necessarily with Airbnb in mind, HMRC introduced an income tax relief generally known as Rent-a-Room relief many years ago. The relief was designed to provide an exemption from income tax where a householder takes in a lodger. There are detailed rules, but generally the lodger lives with the family and can also enjoy goods and services supplied in connection with the room (i.e. meals, laundry etc.).
There are some subtle but important points to note:-
- The lodger lives with the family – this means that the residence must have been the main residence of the Host during that tax year – you cannot get Rent a Room relief for a second property where the Host does not usually reside;
- The relief is not restricted to one lodger or one room, but the lodger must occupy the same dwelling as the family. It cannot be a separate self-contained flat or similar;
- The relief is not only available to homeowners – a tenant renting their property could also take in lodgers and benefit from the relief;
- The relief currently shelters up to £4,250 of income, which for the modest Host should cover any Airbnb income arising in a tax year, but it is important to note….
The devil in the detail – please watch out!
Where rent-a-room income exceeds the £4,250 limit, the rules cease to apply automatically. However, it is possible to make an election to treat the income that exceeds that limit as taxable without reference to any expenses but with the limit still intact e.g. Total income £5,000 less claim for £4,250 = £750 taxable under the rent-a-room scheme. Recordkeeping will therefore be key in determining whether the election should be made and if the election is not made, in respect of all income and expenditure relating to the letting.
You should also note that the Rent-a-Room limit is reduced where there are more than one individuals claiming the relief in respect of the same property e.g. if two people living together let out a room in their home, their Rent-a-Room limit would be restricted to £2,125 each per tax year.
The above note is not intended as and does not constitute specific advice in relation to UK taxes or any other taxes. Specific advice should be taken in respect of an individual’s personal circumstances.