Tax bombshell may curb Airbnb-style short lets

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The government has suggested that it is at least considering changing the terms of its Rent A Room system which could mean ‘hosts’ letting via Airbnb and similar platforms could end up paying more tax than they do now – if they pay any at all.

Rent A Room relief was first introduced in 1992 to incentivise individuals to make spare capacity in their homes available for rent. The government intended this to increase the quantity and variety of low-cost rented housing.

Currently owners can earn up to £7,500 tax free annually by letting a room or the whole house – and it is this tax relief that has inspired many Airbnb and similar platform’s customers, according to the Treasury.

However, in its response to a consultation document on the Rent A Room system it appears the government is to offer the tax relief only if part of a property is let – not the entire property, as is often the case in modern internet-booked short lets.

“Generally those letting out spare rooms are doing so in order to generate small amounts of additional income. and do not see the activity as their main source of income. … Those letting out whole properties will typically receive higher levels of income, let those properties out for a longer period of time, and may operate more like commercial landlords” says the Treasury’s response.

To return to the original philosophy behind Rent A Room, the Treasury appears to be using a new occupancy clause limiting the relief to those who let spare rooms in homes that are otherwise occupied by themselves or other semi-permanent tenants.

Airbnb has long made it clear that its guidance to its hosts has been to claim the relief only on the letting of rooms, not entire properties.

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Written by: Houseladder