Making sure you accurately account for the income from your Airbnb property is extremely important. In recent years the laws have changed regarding expenses you can claim against and which property improvements you can offset tax for.
Whilst there can be a large financial gain with short term lets, you need to make sure your financial records are accurate to keep the tax man happy and things running smoothly. With our top tips we hope to remove some of the potential stress and help you find things a lot less taxing!
Following the Chancellor’s recent budget and with effect from 6 April 2016, the ‘rent a room relief’ was increased from £4,250 to to £7,500. It now means an individual who rents out a room in their main home and meets the conditions will not pay any income tax on the rents received up to this amount, regardless of their other income.
Craig Harman, consultant from Perrys Chartered Accountants added,
“It should be noted however, that this threshold is based on the gross income received before deduction of any expenses and includes receipts for any additional services such as meals and cleaning.
As with any business it is a requirement to keep detailed records of the income received and business expenses incurred, however this is particularly important for those who exceed the above threshold. In this case, the individual can choose to either deduct the relief from their income and only pay income tax on the amount received above £7,500 or deduct their actual qualifying business expenditure if this is greater.
From April 2017, the amount of tax relief available for finance costs against an individual’s residential property income will be restricted. However, individual’s who let out their properties on a short term basis and meet the furnished holiday let qualifying conditions will not be affected by the new restrictions. Therefore those in this position will need to take particular care to monitor the conditions and maintain accurate records to determine the number of days the property was available for and the number of days on which it was actually let during the tax year.”
Whilst it can initially seem daunting and confusing, we recommend keeping a clear record of how many days your property has been occupied throughout each tax year and the income attributed to those stays. (Our new host dashboard which is currently in beta testing will help you do all of this effortlessly!) Once you have this data, leave it to the experts! For very modest fees accountants such as Perrys Chartered Accountants will take care of everything including submitting your tax return to HMRC, allowing you more time to concentrate on the things that matter in life.
So to recap:
- Make a note of the number of days your property is occupied through Airbnb
- Make a note of all the income for all of those stays
- Keep receipts for cleaning, property improvements, repairs etc (These can be offset)
- Find a good accountant to take the above and submit your tax return to HMRC
It’s as simple as that. For more information on, or if you are an existing host who would like to help test Airsorted’s new Host Dashboard please send an email to firstname.lastname@example.org.