AirBnB and Self assessment tax return for UK owners

Are you an AIRBNB host?

As of January 1, 2024, new legislation has been enacted, compelling online platforms like Airbnb to report the earnings of UK hosts for tax purposes. If you’re wondering about the implications for you and seeking guidance on your tax obligations, we understand your concern.

To assist you in navigating these changes and fulfilling your commitment to paying your fair share of taxes, we have compiled a comprehensive guide outlining the details of the new rules and your tax responsibilities.

Key Highlights of the New Legislation:
The recent rules align closely with the existing framework. HMRC had the authority to request user income information from UK-based digital platforms as needed. Notably, Airbnb has historically shared host earnings information with HMRC to facilitate accurate tax payments. The new rules essentially formalize the process of information sharing across all platforms, with the inaugural reporting scheduled for January 2025.

Impact on Your Tax Obligations:
Great news! Your tax obligations for host earnings remain consistent with previous years. The primary modification lies in the reporting mechanism. AIRBNB may require additional information from you, such as your  UTR, if not already provided. Expect further updates from us soon.

Understanding Your Tax Liability:
Navigating the complexities of tax obligations is contingent on your individual circumstances. For personalized information, we recommend researching your specific tax responsibilities or consulting a tax accountant. The taxation structure varies based on factors such as whether you’re renting out your entire property or just a spare room, alongside considerations like your Airbnb income and the duration of hosting.

Assistance for Hosts:
If you find yourself perplexed by these changes, AIRBNB offers a suite of support mechanisms to help you comprehend tax regulations and adhere to the rules:

Explore our UK Tax Hub, a resource-rich platform featuring videos and articles addressing tax-specific topics. Additionally, find Self Assessment Tax Tips for Airbnb . We can additionally support any help you may have.

 

Peruse our free tax guide, compiled by an independent third-party accounting firm, covering general tax information for the UK.
If the intricacies of tax seem overwhelming, don’t hesitate to link with us and we’ll support you, Airbnb also has information about your responsibilities here

Next Steps:
With the deadline for submitting a Self-Assessment tax return on January 31 but you can file your tax return as early as April 6 (day after your financial year end), now is an opportune moment to assess whether you need to declare your income and fulfill your tax obligations. Initiate your tax return by locating your Airbnb earnings on the Transaction History page in your hosting dashboard.

Final Considerations:
Whether you are an established host or contemplating becoming one, ensure compliance with regulations governing guest accommodations on your property. Be aware that your hosting capacity may be subject to restrictions outlined in contracts, laws, and community rules. Additional details can be found here.

Please note that the information provided is not exhaustive and should not substitute for legal or tax advice. We strongly recommend conducting your research to ensure accuracy, given that articles may not be updated in real time. Verify information from reliable sources to confirm any recent changes.

AIRNB and PROFIT FIRST

One of the tips we want to share with you is how to use the Profit First method to manage your Airbnb income. Profit First is a simple system that helps you allocate your money to different accounts based on percentages. This way, you can ensure that you always pay yourself first, cover your expenses, save for taxes and grow your business.

Here are the basic steps to implement Profit First for your Airbnb:

  1. Open four bank accounts: one for income, one for profit, one for taxes and one for operating expenses.
  2. Set your target allocation percentages (TAPs): these are the percentages of your income that you will distribute to each account. You can use the table below as a reference, but feel free to adjust them according to your situation.
  3. Transfer your income to the other accounts twice a month: on the 10th and 25th of each month, move your money from the income account to the other accounts based on your TAPs.
  4. Pay yourself and save for taxes: every quarter, take 50% of the profit account as your owner’s pay, and set aside the money in the tax account for your tax obligations.
  5. Review and adjust your TAPs regularly: as your income and expenses change, you may need to tweak your TAPs to optimize your cash flow and profitability.
Revenue Range Profit % Tax % Owner’s Pay % Operating Expenses %
Up to £250k 5% 15% 50% 30%
£250k – £500k 10% 15% 35% 40%
£500k – £1M 15% 15% 20% 50%

By following the Profit First method, you can take control of your finances, pay yourself what you deserve, and grow your Airbnb business. For more information, check out our guide and the book Profit First by Mike Michalowicz. Happy hosting!