More and more individuals are now renting out rooms in their properties through intermediaries such as Airbnb. Often, it will provide an easy way to generate additional income.

Many individuals may not realise that there can be taxation implications in these circumstances.

The rental income received is not exempt from tax and will be treated as part of the individual’s taxable income. The rental profits may need to be reported to HMRC through the preparation and submission of a tax return each tax year.

If a room is being rented in the individual’s main residence, then rent a room relief potentially provides tax relief.

Under rent a room relief the individual doesn’t pay tax on the first £7,500 of rental income received. This allowance is split if there is joint renting. The tax exemption is automatic if the qualifying rents received are less than £7,500.

If the individual’s rental income is higher than £7,500, then they have the choice to deduct the rent a room relief allowance of £7,500 from the rental income received or to use the actual costs they incur to work out their rental profit, which is then subject to taxation.

If the individual’s rental income does not qualify for rent a room relief, potentially the rental income can be reduced by a flat rate deduction of £1,000 (subject to meeting the qualifying conditions) or alternatively the individual can choose to deduct the actual qualifying expenses incurred.

For Capital Gains Tax, deemed periods of occupation and lettings relief will potentially exempt or minimise capital gains relating to the rental periods of their property.

If you have any specific queries about tax on Airbnb income, please get in touch.

The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.

Lambert Chapman Chartered Accountants

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