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 much more comfortable to rent a room or an entire home. So, landlords are now much more interested in short-term renting, compared to 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 stated that they switched from long-term renting to short-term renting 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 their home out temporarily or have a secondary home that they choose to rent.

Fiscal rules short letting UK

Different in tax situation for buy-to-let and short-term renters

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

As for short-term renting owners, they enjoy better tax benefits!

Tax Benefits of Short-term renting

Thanks to the new regulation that was put into place a couple of years ago, the income of short-term rental could be tax-free in some cases.

1 - If you rent only rooms

Back in 2015, the new law stated that you could earn up to £7.500 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 case you earn more you will just need to complete a tax return form online. However, those who rent out their entire home would 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 turnover is less than £ 1.000.

From April 2017, a further legislation has kicked in for the sharing economy. It is aimed at "micro entrepreneurs" who make a little additional income on the side from services such as lift sharing or sell their belongings on eBay. It also applies to those who rent out their properties on sites like Airbnb and, called "property allowance". However, you can only claim one rent-a-room relief, it is not cumulative.

If you earn more than £ 1.000 you can apply for a "partial relief" to choose if you wish to deduct your usual property business expenses or deduct from income the £1,000 property allowance.

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

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