TAX • 30 SEPTEMBER 2025 • 4 MIN READ
UK tax guide for short-term rentals like Airbnb
The rise of platforms like Airbnb has made it easier for people to earn income from renting out a spare room or a separate property. In the UK, this is often referred to as a "short-term rental" or "holiday let". If you're considering this, you need to understand the tax consequences.
*For the ease of reading, we’ll refer to this as Airbnb income for the rest of the article.
Do you have to pay tax on Airbnb income?
You must declare any property or self-employment income that exceeds £1,000 in a tax year. Your rental income, like any other income source, is subject to income tax.
Tax-free allowances
There are two main tax allowances that might apply to your Airbnb income:
- Rent a Room Scheme: if you rent out a furnished room in your main residence, you can earn up to £7,500 per year tax-free under this scheme. This allowance is automatically applied if your gross receipts are less than the limit. If you jointly own the property with a spouse or civil partner, the allowance is split equally, meaning you can each earn up to £3,750 tax-free. If your rental income is higher than the allowance, you have a choice: either pay tax on your gross receipts over the allowance (with no expenses claimed) or pay tax on your actual profit (gross receipts minus expenses). You can't claim both the tax-free allowance and expenses.
- Trading Allowance: this allowance is for individuals who rent a separate property that is not their main residence. It allows you to earn up to £1,000 in property income per tax year without having to declare it to HMRC. If your allowable expenses are less than £1,000 it is more tax-efficient to claim this allowance instead of your expenses.
Declaring Airbnb income
You must register for Self Assessment and declare your earnings if your gross income from property is more than £1,000. The deadline to register is 5 October following the end of the tax year in which you first started earning rental income.
HMRC now receives income data directly from platforms like Airbnb, so they are aware of your earnings. It's crucial to be transparent and accurate when filing your return to avoid penalties.
Expenses
You can reduce your taxable profit by deducting allowable rental expenses. These may include:
- Utilities such as gas, electricity and water
- Council tax or business rates
- Insurance
- Cleaning and maintenance services
- Letting agent fees and advertising costs
- Repairs (but not improvements)
- Mortgage interest (since April 2020, relief is restricted to the basic rate of income tax, which is 20% tax credit).
Furnished Holiday Lettings (FHL)
While previously a beneficial tax regime, the Furnished Holiday Lettings (FHL) tax scheme has been abolished as of 6 April 2025. This means that the special tax treatments that applied to FHLs, such as full mortgage interest relief and certain Capital Gains Tax reliefs, are no longer available. From the 2025/26 tax year onwards, you will follow the same rules as other landlords when renting out property.
VAT
You must register for VAT if your taxable turnover for the last 12 months goes over the threshold of £90,000. If you have to register, you will need to charge VAT on your Airbnb income at the standard rate of 20%.
Other Considerations
By using your property to derive income there can be other issues that need to be considered:
- Council tax vs business rates: if you let a property on a commercial basis for short periods, it may be subject to business rates instead of council tax. To qualify for business rates, a property must be available for commercial letting for at least 140 days a year and actually let for at least 70 days.
- Insurance: standard home and contents insurance may not cover short-term rentals. You may need to get specialist cover.
- Buying and selling property: the way you use a property for short-term rentals can affect taxes like Stamp Duty and Capital Gains when you buy or sell.
Tax rules for short-term rentals can be complex and depend on your individual circumstances. Our advice, as always, is to speak to your accountant or tax advisor and get some direct information that is pertinent to your situation before listing your property for short-stay rental on Airbnb (or any other platform).
Who are Beany?
We’re an online accounting firm that believes in delivering big firm expertise without the big cost. Our team work from across the UK to help business owners with everything accounting, including annual accounts, bookkeeping, payroll, forecasts, financial reporting and more. If you're looking for an accountant for your business, get in touch or book a call with our team for a free consultation.
Charlotte Wass
General Manager, Beany UK
Chartered Accountant and Chartered Tax Adviser based in London. I love autumn, otters and Malteasers, and I hate spiders, peanut butter and the London Underground.
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