UK Airbnb Tax – The definitive guide 2021

It is a very easy way of generating some much-needed extra cash. But being in the UK, it is important that you understand and are completely aware of all of the Tax Rules with UK Airbnb Tax.

You really don’t want to make any mistakes and find yourself in muddy waters when it comes to paying Airbnb income Tax. One minute everything is hunky-dory. You have been renting your Airbnb property out over the last year or so. You have had money coming in. Next thing you know you have an unexpected tax penalty bill come through the door.

So it is best to be extra vigilant and find out everything you need to know upfront. Luckily enough there are some Tax benefits and Tax-free allowances that you can use to your advantage as an Airbnb host.

What is a furnished holiday let?

Firstly you need to define whether your Airbnb property falls under the classification of FHL (furnished holiday let). The following will tell you if your Airbnb property qualifies.

It will need to:

  • be available for letting on Airbnb for at least 210 days of the year.
  • contain a sufficient amount of furniture to find it being classed as everyday use
  • be in the UK obviously and,
  • be rented out to the general public for at least 105 days of the year

Income Tax or Business Rates?

The answer to that question lies in whether you are renting out the property that you reside in yourself. If you are, then you will pay Income Tax.

But on the other hand, if your property is one you own but don’t live in, or only some part of the year (investment, secondary residence, etc) then you will be liable for Business rates.

On the flipside, any Airbnb property can also be subject to business rates if:

  • In England: the property is available to let for 140 days or more per year. This is classified as a self-catering property.
  • In Wales: the property is available to be let for 140 days per year or more and will be let for 70 days.
  • In Scotland: any property available to let for 140 days or more per year may be subject to business rates but it is advisable to contact the local assessor. He or she will then assess and look at the type of property, plus the size and its location to come up with a rateable value.

Am I liable to pay Council Tax?

 If you are renting out your Airbnb holiday home or investment property as stated in the above criteria, you will find that there are constraints. 

You will only be liable to pay Council Tax if you are paying Income Tax. But if you are paying Business Rates then you will find your property won’t be able to qualify to be pay Council Tax as you won’t be required to pay both.


Now you mustn’t forget about that little tax called VAT. It is set at a threshold of £85,000 per year. If your total Airbnb rental income is more than this threshold then you are going to have to register for VAT.

Either you can pay all of it yourself. Or you can add it to your guest bill. But most customers don’t really like that. The other option is to just slightly raise your nightly rate of your accommodation intern. In the process, splitting the cost of the VAT with yourself and your customer.

UK Airbnb Tax Relief

There are various tax relief and benefits available to Airbnb property’s if they qualify as a furnished Holiday Let. They come in the form of:

  • Micro-Entrepreneurs allowance: The UK government has initiated a scheme which is aiming to support Micro-Entrepreneurs. If you are one and you are letting out your properties on websites such as Airbnb the scheme grants you perks. It allows you to deduct £1000 against your gross income to calculate and arrive at your taxable annual rental income figure.
  • Capital gains Tax Relief: This benefit applies if your property qualifies as a FHL and you own an investment property that you don’t live in but you rent out. This benefit gives you a 10% capital gains tax rate instead of the usual 28% when selling your property under the Entrepreneurs scheme. You will be able to defer capital gains tax on the sale of your initial property when you sell one Airbnb residence and buy another one under the rollover scheme.

And finally, you can avoid paying capital gains tax under the gift Hold-Over relief scheme. This involves you as a business owner giving away your business assets or selling them for less than what they are worth so you can help out a buyer. And it will also give you access to capital allowance for property furniture and fittings. And it will also count towards your pension contribution.

Nestify Helps You Manage Your UK Airbnb Tax

So the very big important question you have to ask yourself is:

  1. Are you doing Airbnb just to pay a few bills and bring a few extra pounds in at the end of the month? Are you doing it with an income of less than £11,850 by letting your property out for less than 140 days?
  2. Do you want to be a business renting your property out all year round with an income over £11,850?

This will help you define if (a) or (b) you will be classed as a person or a business. This in turn will tell you what UK Airbnb tax you will be liable for and have to pay.

Nestify services we will help through the very complex business of managing an Airbnb. Because it cannot be stated enough just how important it is to:

  • Know
  • Understand
  • And comply

…with all of the regulations. Otherwise, you could find yourself ending up with a steep fine. If you have absolutely any queries or doubts it is always best to seek legal advice.