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If you are an Airbnb owner you should know what expenses can be claimed for tax purposes. Can a Rent-a-Room Relief be claimed? How does it affect Private Residence Relief and what are the VAT rules? 

In this blog post we will take a look at what expenses homeowners who let all or part of their UK property as an Airbnb can claim for tax purposes and what the tax implications are. It does not deal with overseas properties, specialist and local advice should be taken where property is let abroad.

• In some cases, the conditions for Furnished Holiday Lettings (FHL) may be met although if only seasonal letting is available, the requirement for the accommodation to be available for let for 210 days a year may not be achievable.
• Income from Airbnb is generally rental income.
• If you are only renting out a room in your own home you should be able to claim Rent-a-Room Relief provided that you meet the various qualifying conditions.
• You cannot claim Rent-a-Room relief as well as either the £1,000 trading and property allowances.

The following expenses can be deducted irrespective of whether there is a trade or a let property business as long as it is run on a commercial basis:

Cost of goods bought for resale or goods used

• Materials you consume in your business or sell to your customers e.g: cleaning products; consumables provided for guests such as tea, coffee, milk, sugar etc; bedding, towels, crockery, cutlery etc assuming a life of less than two years.
• Costs of clothing and workwear if it is branded with a logo, such as polo or t-shirts and caps, or required for hygiene, health and safety.

Wages, salaries and other staff costs

• If you hire staff i.e. cleaners, admin staff, you should perform an Employment status check to decide whether your workers are your employees or self-employed.
• Gross wages or salary paid to them is tax-deductible.

Cars, van and travel expenses

• Business travel costs are tax-deductible.
• Home-to-work travel is not deductible if attendance at that workplace is 'regular and predictable'.

Rent, rates, power and insurance costs

• Public liability, buildings and contents insurance.
• Utility costs for any office you have.
• An allowance for the use of your home for business can also be deducted if you are using home as your office and for storage purposes.
• You can claim a flat rate with no evidence, or you can claim a calculated proportion of costs including a share of:
  • Council Tax.
  • Home Insurance.
  • Mortgage interest or rent.
  • Utilities and Water rates.

Repairs and maintenance of property and equipment

Assuming you do not have an FHL business:

• You cannot claim capital allowances on plant and machinery used in a dwelling house. You can claim the replacement, but not the original cost, of furniture and equipment, such as: beds, wardrobes, tables etc; large kitchen appliances, televisions etc;
  • The relief does not apply to fixtures such as fitted bathroom furniture or ovens, boilers or radiators; relief can be obtained on these as repairs unless they are capital improvements in which case a deduction is available when the property is sold.

If you do have an FHL business:

• Capital allowances can be claimed on all of these items on purchase unless they qualify as repairs or costs of goods sold or consumed including the Annual Investment Allowance but not the structures and buildings allowance.
• Repair costs to furniture, plant and equipment, the property itself.

Whether your business is an FHL or not:

• The cost, repair and replacement of small items of equipment that will last less than two years can be claimed as an expense: pots, pans, utensils; kettles, toasters and small appliances; internal signage.

Phone, fax, stationery and other office costs

• Business use of mobiles and home phone or internet.
• Pens, paper, ink, stamps, envelopes etc. used in the business.
• Trade magazines/periodicals used to keep you up to date.
• Subscriptions, IT costs and software used for your business, e.g.
  • Bookkeeping and accounting.
  • Administration and secretarial.

Advertising and business entertainment costs

• Advertising in papers, magazines or online.
• Sky and other TV subscriptions.
• The costs of running a website. 

Accountancy, legal and other professional fees

• Trade association fees and subscriptions.
• Accountancy fees
• Legal fees unless they relate to capital.

Trading and property allowance

If the total of the above costs is less than £1,000, you can instead claim the Trading Allowance, which is a fixed £1,000 deduction from profits. No other expenses can be claimed.

Where any costs have a private element, that part is not an allowable deduction. Particular care is required where there is mixed use such as when part of your residence is let as an Airbnb.  

VAT

VAT can apply to Airbnb if income exceeds the £85,000 VAT Registration threshold, unlike ordinary residential letting, as it is defined as holiday accommodation for VAT purposes. The standard rate (20%) applies.

Business rates & holiday letting

Following a consultation ‘Business rates treatment of self-catering accommodation’ in England from 1 April 2023:

• A 140-day availability and 70-day letting condition, both applying to the previous year, will be added to the Business Rates qualifying criteria.
• Where these conditions are not met, Council Tax, rather than Business Rates will be payable in respect of the property.
• A similar 70-day letting condition was introduced in Scotland from 1 April 2022.

If you need further help or have any questions, do not hesitate to contact us - we offer professional and affordable accounting services.

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