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As The Landlord’s Accountants, THP has teamed up with Hammock – the Making Tax Digital compliant software made by landlords for landlords.

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As the Eurovision Song Contest landed in Liverpool in April, Airbnb was quickly in the news. Some hosts were quick to try and hike rents. One asked £2,046 for a £465 stay. Another asked an eyewatering £41,000 instead of the normal £200. One thing’s for sure, if you’re an Airbnb host in the right place at the right time, there’s money to be made. Little wonder HMRC has been focusing on an Airbnb tax crackdown.

Airbnb tax warning letters

Since February, the taxman has sent out over 800 letters to people who advertise their properties on short-term rental platforms like Airbnb. These letters are intended to remind hosts they need to declare their rental income in most cases.

The only exceptions are when you make a gross income of up to £1,000 per year from your side hustle. This is protected by the Trading Allowance. If you rent out a room in your own home, rather than a separate property, you could benefit from the ‘Rent a Room’ relief instead. Designed to encourage people to take in lodgers, it allows you to earn up to £7,500 tax free from the rent. If you share the income (such as with a partner) you can have up to £3,500 tax-free each.

HMRC gets Airbnb income records

HMRC’s crackdown on Airbnb income is about to go beyond sending nudge letters. According to both the Daily Telegraph and The Times, Airbnb has been forced to share all users’ income details as far back as the 2017-18 tax year.

This is going to cause major headaches for any hosts who haven’t declared all or any of their Airbnb income over the last six years. The taxman has a sophisticated system called HMRC Connect which can cross reference a huge amount of personal and financial data. If the data released by Airbnb doesn’t tally with your recent tax returns, there’s an extremely strong chance HMRC will be in touch to ask why.

What happens if I haven’t declared Airbnb income?

If you haven’t declared income, you can face significant penalties. We’ve written a more detailed guide to tax penalties, but in summary, if you:

  • made a genuine mistake you won’t face a penalty (though you’ll have to pay any tax due)
  • didn’t take reasonable care, you could pay a penalty of up to 30% of tax due
  • made a deliberate error, you can be fined between 20% and 70% of the due tax
  • made and concealed a deliberate error the penalty is between 30% and 100% of the tax you owe.

Things can get very expensive if HMRC opens a discovery assessment. This allows them to open an inquiry into the last four years of your tax affairs. If you didn’t take reasonable care, this extends to six years. In cases of dishonesty this can stretch back 20 years.

I haven’t been paying Airbnb tax – what do I do?

If you haven’t been paying the right tax on your Airbnb income, it’s vital to act now to keep penalties as low as possible. HMRC is currently running a let property campaign. By disclosing any undeclared income before HMRC investigates your tax affairs, you have a strong chance of keeping penalties to a minimum.

You can find full details of the let property campaign here. We would be very happy to help you through the disclosure process. However, do remember that – now HMRC has access to all Airbnb income data over the last few years – now is the time to act.

Need further advice on any of the topics being discussed? Get in touch and see how we can help.

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    Avatar for Jon Pryse-Jones
    About Jon Pryse-Jones

    Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.

    An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”

    Jon’s appreciation for THP extends to his fellow team members and the board.  “They really know how to run a successful business,” he says.  He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.

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