News & EventsWho? What? Where? Why? Read all about it here!

Get the Latest


Airbnb and Income Tax - Do you Know the Facts?

Initially viewed as a way to facilitate students sofa-surfing their way around the world, Airbnb now attracts listings from a wide variety of people, including young professionals struggling to cope with increasing rents. Although it can be a great way to earn extra money, some people are concerned about the income tax implications involved in doing so. While the exact figures will depend on your individual circumstances, we created a handy general guide below should you decide to take the plunge! 

Tax on rental income 

You must normally pay income tax on any profit you make from renting out a property in your ownership. Your profit is the sum left once you deduct any ‘allowable expenses’ from your total rental income. Allowable expenses include:

  • Council tax
  • Mortgage interest payments (although capital mortgage payments are non-deductible)
  • Utility bills
  • Costs for services such as cleaning and gardening
  • Contents insurance
  • Repairs and maintenance (but not improvements)

The expenses should be incurred wholly and exclusively as a result of renting out your property. In addition if you let your home fully furnished, which is usually the case when renting via Airbnb, you can also claim a 10% wear and tear allowance. 

Your profits will be taxed at the same rate as any income you receive from your business or employment – that is at 20%, 40% or 45% depending on your tax band. 

However if you are using Airbnb to rent out a room in your only or main home (as 80% of hosts in the UK do) you can use a scheme known as “rent-a-room relief’ to receive up to £4,250 gross income tax-free. This figure is set to increase to £7,500 from 6 April 2016. 

Rent-a-room relief

To qualify for the relief, you must provide furnished residential accommodation in your only or main home. If you decide to up your ante as a host and offer, and receive payment for, services such as providing meals, cleaning or laundry these payments must be added to the rent received and you cannot deduct expenses. The tax-free limit may be halved if someone else receives rent from letting out the same home. 

If you earn less than £4,250 in a tax year from renting a room in your home, you will be exempt from tax under the rent-a-room scheme. If you receive more than this, you can choose to either:

  1. Pay tax on your profit in the usual way for rental income as described above, or
  2. Pay tax on your gross income less £4,250 with no allowance for expenses

To work out which option is better for you, calculate your allowable expenses. If these are less than £4,250 you will be better off using the second option. You can switch between the different options from year to year but you will need to inform HMRC. It is worth noting that option 1 automatically applies unless you tell HMRC you wish to use option 2. 

Reporting your income

If your home proves to be a hit on Airbnb and you receive more than £2,500 in rental income in a tax year, you will need to register for self-assessment (if you have not already done so) and your income will need to be reported on a tax return. If your income from the rental is less than this, you will still need to inform HMRC that you are renting your property but you may not need to complete a full tax return. It is best to check your position with HMRC in these circumstances. 

You must register for self-assessment by 5 October after the end of the tax year you started renting your property in and pay any tax you owe by 31 January following the end of the tax year. 

Other points to consider

There have been several stories in the news of Airbnb hosts being fined, sometimes substantial sums, for renting a room in contravention of local laws. It is worth checking that there are no such restrictions in your area. You should also check:

  • If your lease allows you to take in a lodger if you rent your home
  • If your lender allows you to take in a lodger if you have a mortgage on your home
  • If your insurance company will allow you to do so and if so whether your current cover is sufficient 

For individual advice on issues around Airbnb or other tax areas, contact partner Tessa Till on or 0131 624 6814.


Not sure where to start? Why not just give us a call today on
0131 624 6820 for Edinburgh or 01334 475001 for Fife to discuss your needs.

All fields marked with * are needed


Want to work with a local, friendly company? Then find your nearest Pagan Osborne office to you below. However, we also work with clients throughout the UK so you can call any of our numbers and our helpful reception staff will be happy to forward on your call to the most appropriate expert to suit your needs.

Clarendon House
116 George Street
EH2 4LH Call Us
Tel: 0131 624 6820
Fax: 0131 220 1612
2 Comiston Road
EH10 5QE Call Us
Tel: 0131 539 3333
Fax: 0131 538 7204
St Andrews
106 South Street
St Andrews
KY16 9QD Call Us
Tel: 01334 475001
Fax: 01334 476322
12 St Catherine Street
KY15 4HH Call Us
Tel: 01334 653777
Fax: 01334 655063
1 Crossgate
KY15 5HA Call Us
Tel: 01334 656525
Fax: 01334 654119
Pagan Osborne
5a Shore Street
KY10 3EA Call Us
Tel: 01333 310703
Fax: 01333 311918


Got a question? Fill in your details below and we'll give you
a call back on the date and time you have chosen.