Tax benefits of short-term renting in the UK

Sites like Airbnb have completely changed the way that people view short-term letting. Instead of staying in a corporate hotel or a serviced apartment, many consider it easier and more pleasant to rent a room or an entire home. As a result, owners are now far more interested in renting their property on a short-term basis than before.

Whatever the reason, there is more demand for short-term lets than ever before. According to stats from the Residential Landlords Association, 7% of the landlords confirmed that they have switched from long-term to short-term letting on sites like Airbnb.

What are the different types of short-term renting?

  • Buy-to-let: Some people purchase homes purely to rent them out as a holiday let.
  • Short-term renting: Others either rent out their home temporarily or have a secondary home that they choose to let.
Fiscal rules short letting UK

The difference in tax regulations for buy-to-let and short-term renters

Since the Government introduced tougher tax rules, buy-to-let schemes have become far less popular. Before April 2017, property owners were able to deduct mortgage interest from their taxable income. This amount of this relief is now being reduced annually until the new law is fully implemented, in about 2-3 years' time.

However, the owners of short-term rental properties get to enjoy better tax benefits!

Tax Benefits of short-letting

ago, the income from a short-term rental can be considered tax-free in certain cases.

1 - If you rent only rooms

Back in 2015, the new law stipulated that you could earn up to £7500 tax free per year from letting out a furnished accommodation in your home, called the "The Rent a Room Scheme". There is no restriction on the number of rooms you wish to short-let and the tax exemption is automatic if you earn less than the threshold. In the event you earn more, all you need to do is to complete a tax return form online. However, those who rent out their entire home will still be taxed on the profits.

2 - If you rent your entire home

If you rent out your entire home, you won't need pay any income tax or register with HMRC if your annual turnover is less than £1000.

In April 2017, another law was introduced targeted to the sharing economy. It is aimed at "micro entrepreneurs" who make some additional income on the side from services such as lift sharing or selling their belongings on eBay. It also applies to those who rent out their properties on sites like Airbnb and Booking.com, and is referred to as the "property allowance". However, you can only claim one relief, it is not cumulative.

If you earn more than £1000 a year, you can apply for a "partial relief". This allows you to choose whether you wish to deduct your usual property business expenses from your income or to deduct the £1000 property allowance instead.


Ready to say goodbye to the hassles of a short-term rental and boost your property’s value?

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