Airbnb has become one of the most popular platforms for short-term rentals, allowing property owners and tenants to earn extra income by letting out a spare room, an entire property, or even holiday homes. As more people take up hosting, many are unaware of how to properly account for this income when it comes to tax. Whether you’re a casual host or regularly renting out property, understanding your tax obligations is essential.
Earnings from Airbnb are taxable in the UK, and how you are taxed depends on the amount you earn and whether the property is your main home or an investment property. Navigating the UK tax system as an Airbnb host can seem complex, but with the right information, you can meet your obligations and ensure you’re not paying more tax than necessary.
Do you have to report your Airbnb income to HMRC?
Yes, in most cases. If your Airbnb or other short-term rental income exceeds the £1,000 trading allowance within a single tax year, you are required to report it. This is true regardless of how frequently you host or whether it’s a single room or an entire property. The trading allowance provides some leeway for hobby hosts, but regular or higher-earning hosts will need to declare their income.
Airbnb income is considered rental income and must be included in your Self Assessment tax return. This ensures that HMRC is aware of your income and that you are paying the correct amount of tax. If your hosting is more than occasional, failing to report this income could lead to penalties.
Registering for Self Assessment
If this is your first time earning untaxed income, including income from Airbnb, you must register for Self Assessment. The deadline for registration is 5 October following the end of the tax year in which you first received this income. For instance, if you started hosting in May 2024, you need to register by 5 October 2025.
Once registered, you’ll be issued a Unique Taxpayer Reference (UTR), which you’ll need when submitting your return. You can then file your return online by 31 January following the end of the tax year. If you choose to file a paper return, the deadline is earlier: 31 October.
It’s crucial to register and file on time to avoid late filing penalties. Even if you don’t owe tax, missing the deadline can lead to automatic fines.
Understanding the types of Airbnb income
The tax treatment of your Airbnb earnings depends on how you use the property. Broadly speaking, there are two main types:
- Renting out a room in your main home
- Renting out a separate property
If you rent a room in your main residence and also live there during the rental period, you may be eligible for the rent-a-room scheme. This scheme allows you to earn up to £7,500 tax-free per year, or £3,750 if you share the income with a partner. This allowance covers your Airbnb income without needing to calculate or report specific expenses.
However, if your Airbnb income doesn’t qualify for the rent-a-room scheme, such as letting an entire home or second property, your rental earnings fall under the standard property income rules. In this case, you must calculate your income and deduct allowable expenses to determine the taxable profit.
Profit calculation and tax rates
Profit is calculated by subtracting allowable expenses from your total Airbnb income. For example, if you earned £10,000 from Airbnb and incurred £3,000 in allowable expenses, your taxable profit would be £7,000.
The tax you pay on this profit depends on your overall income for the tax year. The standard income tax bands in the UK determine whether you pay 20 percent, 40 percent or 45 percent. This means that if Airbnb income pushes you into a higher band, you could pay more tax than expected.
If your total income remains within the basic tax band, your Airbnb profit will be taxed at 20 percent. If it falls within the higher or additional rate bands, the tax rate will be 40 percent or 45 percent respectively. It’s also important to consider National Insurance contributions, which may apply if Airbnb hosting becomes your main source of income.
When is Airbnb income not taxable?
There are limited cases where Airbnb income might not be taxable:
- If your total earnings from Airbnb and similar sources do not exceed the £1,000 trading allowance.
- If you qualify for and stay within the rent-a-room scheme threshold.
Outside of these two cases, you should expect to pay tax on your Airbnb income. Even if you think you fall within the exemption limits, it’s still wise to keep detailed records of your income and expenses.
What expenses can be claimed?
If you don’t qualify for the rent-a-room scheme, or you choose to opt out in order to claim actual expenses, you can deduct a range of costs from your Airbnb income. These allowable expenses help reduce your profit and lower the amount of tax owed.
Common allowable expenses include:
- Mortgage interest (not the capital repayment)
- Council tax
- Gas, electricity, and water bills
- Insurance costs specific to rental use
- Repairs and maintenance
- Cleaning and laundry services
- Advertising and platform service fees
- Replacement of domestic items (under specific conditions)
These expenses must be incurred wholly and exclusively for the purpose of letting the property. When items are used both personally and for guests, you must apportion the costs reasonably. For instance, if you rent out one room in a three-bedroom home, only a third of the utility costs might be claimable.
Record keeping and documentation
HMRC expects hosts to maintain accurate and complete records of their Airbnb activity. These records must be kept for at least five years following the end of the tax year in which the income was earned.
Documents to keep include:
- Receipts and invoices for expenses
- Bank statements showing Airbnb deposits
- Booking records and calendars
- Copies of correspondence with guests
Maintaining these records helps support your Self Assessment tax return and is essential if HMRC asks for evidence or launches an enquiry.
What forms do you need to complete?
To report Airbnb income, you’ll use the main Self Assessment form and the SA105 supplementary page, which is specifically for property income. On the SA105, you must include your total rental income, allowable expenses, and the resulting profit or loss.
You should also report any other income, such as employment, dividends, pensions, or freelance earnings. HMRC uses this information to assess your overall tax liability and determine whether you owe tax at the basic, higher, or additional rate.
What if you have multiple properties?
If you host more than one Airbnb property, HMRC generally allows you to treat them as one rental business and submit a combined figure. You don’t need to break down income and expenses per property unless they have very different characteristics or are managed separately.
However, you should still keep records for each property individually in case HMRC requires more detail. Treating them as one business simplifies reporting but doesn’t eliminate the need for careful documentation.
Should you register as a business or stay as an individual?
Many Airbnb hosts wonder whether they should operate as a sole trader or register a limited company. In most cases, Airbnb hosts can report their income as individuals using the property income pages of their Self Assessment. There is no requirement to register a business unless the scale of operations justifies incorporation.
Forming a limited company may have some tax benefits, but it also introduces additional responsibilities and filing requirements. It’s best to get professional advice before switching to a company structure, especially if you’re earning significant income or expanding your hosting activity.
Next steps for new hosts
If you’ve just started hosting or plan to, take the time to register with HMRC, gather your income records, and assess your eligibility for tax allowances. Even if your income is low in the beginning, proper record keeping ensures you’re ready when your hosting becomes more consistent or profitable.
Understanding these tax basics puts you in a better position to make informed decisions.
Maximising Allowable Expenses for Airbnb Hosts
Understanding which expenses you can claim as an Airbnb host is essential to reducing your tax liability. If you are earning rental income outside the rent-a-room scheme, HMRC allows you to deduct costs that are incurred wholly and exclusively for the purpose of your Airbnb letting. The more accurately you identify and apportion these expenses, the more efficiently you can manage your taxable profits.
We’ll examine the different types of expenses that Airbnb hosts in the UK can typically claim. We’ll also explain how to record these deductions correctly and apportion shared costs fairly when the property is also used for personal purposes.
The importance of keeping records
To begin with, record keeping is a fundamental part of managing your Airbnb business. Whether you let a spare room in your own home or a separate rental property, you should retain receipts, invoices, bank statements, and booking details. These records not only help complete your tax return but also provide evidence if HMRC requires proof of your expense claims.
Records should be kept for at least five years after the 31 January submission deadline. This means if you submit your 2024/25 return in January 2026, you should retain records until at least January 2031.
Categorising your expenses
Allowable expenses fall into specific categories. The key to successful tax deductions lies in properly categorising each cost and ensuring it directly relates to your Airbnb hosting activity. Here are the most common categories of expenses Airbnb hosts can claim:
Mortgage interest
You can claim tax relief on the interest portion of your mortgage if the property is used to generate rental income. This does not include the capital repayment element. In recent years, relief on mortgage interest for landlords has been restricted, but relief is still available through a basic rate tax credit.
If the property is partially rented (for example, you live in it as well), then only a proportion of the interest can be claimed. You must divide the interest based on floor space, time rented, or another reasonable method.
Council tax and utilities
Expenses like gas, electricity, water, and council tax can be deducted, provided they are associated with the part of the property being rented. Again, if the property is shared with the host, you will need to work out a reasonable proportion of the costs to claim.
One method is to calculate the total annual utility bills and divide them by the number of rooms or occupants, adjusting for the number of days the space was rented out. This ensures your claims reflect actual usage and stay within HMRC guidelines.
Cleaning and maintenance
You can claim for cleaning services, laundry of bedding and towels, and routine maintenance. These are recurring costs that many hosts incur between guest bookings. If you pay a cleaner or laundry service, keep receipts and make sure to separate Airbnb-related services from general household ones.
Repairs and maintenance to the rental area are also deductible, but capital improvements are not. For example, repainting a guest room after regular use is allowable, but adding a new conservatory would be considered a capital cost and is treated differently for tax purposes.
Insurance costs
Specialist landlord insurance or short-term letting insurance policies are deductible. If your standard home insurance policy includes Airbnb coverage, a proportion of the premium may be claimed based on the part of the property used and the rental period.
It’s advisable to speak with your insurance provider to ensure you are properly covered, as standard policies may not always include letting activity.
Replacement of domestic items
If you replace items such as beds, sofas, or kitchenware in a furnished property, you may be able to claim replacement of domestic items relief. This applies only when the new item is a like-for-like replacement and the old item is no longer usable. The cost of the replacement, not the original item, is eligible, and it cannot be an upgrade.
For example, replacing a worn-out mattress with a similar model would be allowed, but upgrading from basic furnishings to luxury ones would be considered an improvement, and costs cannot be deducted under this relief.
Fees and commissions
Airbnb charges service fees on every booking. These platform fees are tax-deductible and should be recorded as an expense. Any additional costs for listing your property on other short-term rental platforms, such as listing fees, featured ad placements, or payment processing charges, can also be claimed.
If you hire a property manager or pay a letting agent to oversee bookings, deal with maintenance, or handle guests, those costs are fully deductible as well.
Advertising and marketing
Should you choose to advertise your property separately—perhaps through local publications, social media promotions, or Google Ads—these marketing expenses can be deducted. Be sure to maintain clear records of what was spent and the platform used.
Even small promotional efforts, such as printing flyers or paying for a professional photographer to take listing photos, fall into this category and can be claimed.
Subscriptions and licences
If you use paid tools or software for managing bookings, tracking expenses, or issuing invoices, these subscriptions count as business expenses. In some local councils, short-term rental properties may require a licence or incur registration fees. These costs are also considered deductible.
It is important to distinguish personal software subscriptions or household licences that are unrelated to hosting, as these would not be allowable.
Apportioning mixed-use costs
Many Airbnb hosts use part of their home for personal living and another part for guest rentals. In such cases, costs must be divided fairly. Apportionment methods include:
- By floor space: dividing the property into equal sections by square footage
- By time: proportion of the year that the property or room was rented
- By occupancy: how often the space was in use for guests
For example, if you rent a bedroom for half the year, you might claim 50 percent of that room’s share of the utilities and insurance. If you provide guests with access to shared spaces like the kitchen, you may also be able to claim part of those expenses.
It’s advisable to be consistent in your approach and able to justify your calculations if questioned. Keep written notes of how apportionments were worked out, along with supporting documentation.
Dealing with capital expenses
Capital expenses refer to significant improvements or purchases that add value to the property. These are not immediately deductible as business expenses. Instead, they may be eligible for capital allowances or impact future capital gains calculations if the property is sold.
Examples of capital expenses include:
- Adding a new extension or bathroom
- Installing central heating for the first time
- Purchasing a new property
If you’re unsure whether a cost is revenue (deductible) or capital (non-deductible), it is best to consult a professional or refer to HMRC’s detailed property income guidance.
Handling losses
If your allowable expenses exceed your Airbnb income in a given year, you will generate a loss. This can be carried forward to offset against future profits from the same rental business. You cannot, however, use these losses to offset income from employment or other unrelated sources.
When filing your Self Assessment tax return, be sure to record this loss so that it’s recognised for future use. Losses can accumulate and be used in future years when your hosting activities become profitable.
Expenses you cannot claim
Not every expense is tax-deductible. Common non-deductible items include:
- Personal travel not related to the rental activity
- Clothing and personal items
- Food and drink consumed by the host
- Initial property purchase price or mortgage capital repayments
- Major upgrades that are not like-for-like replacements
Always refer to HMRC’s official guidance or seek advice if you’re uncertain. Making incorrect claims, even unintentionally, can lead to penalties or adjustments later on.
Preparing for your tax return
By categorising your expenses and maintaining accurate records throughout the year, the process of completing your Self Assessment becomes significantly easier. Create a monthly log of your Airbnb income and costs. Use folders—digital or physical—to store receipts, invoices, and notes.
Consider using accounting software to automate tracking and calculations. This is especially useful if you host multiple properties, work with letting agents, or have other sources of income to declare. It’s also helpful to reconcile your Airbnb earnings to your bank account regularly. This ensures your records match HMRC’s expectations and improves accuracy when submitting your return.
Filing Your Tax Return and Staying Compliant as an Airbnb Host
After keeping accurate records of your Airbnb income and allowable expenses, the next step is completing your Self Assessment tax return. Filing correctly ensures you remain on the right side of HMRC and prevents unnecessary penalties or investigations. We walk through the process of submitting your return, managing payments, and maintaining ongoing compliance.
When and how to file your tax return
If your Airbnb income is above the trading allowance or not covered under the rent-a-room scheme, you must register for Self Assessment and complete a tax return annually. The deadlines are:
- 5 October: Registration deadline following the tax year in which you started earning untaxed income.
- 31 October: Paper tax return submission deadline.
- 31 January: Online submission and payment deadline.
It’s advisable to submit online, as it provides more flexibility, time, and instant confirmation of submission. Once registered, HMRC will issue a Unique Taxpayer Reference (UTR) and set up an account where you can file electronically.
Completing the SA105 Property Supplement
Airbnb income is classified as property income. This means you must complete the SA105 form alongside the main Self Assessment return. This form includes:
- Total rental income received
- Allowable expenses
- Net profit or loss
If you own multiple rental properties or host more than one Airbnb unit, HMRC usually allows you to report the figures together as one property business. However, records should still be maintained separately in case clarification is needed later.
Carefully review each field on the SA105 form. Make sure that income is reported in full and expenses are allocated to the correct category. Omissions or inconsistencies could delay processing or lead to penalties.
Including other income sources
Your tax return must include all your taxable income, not just Airbnb earnings. This might include:
- Employment income
- Self-employment income
- Dividends
- Savings interest
- Pensions
- Capital gains
Each income source affects your overall tax rate, and therefore the tax payable on your Airbnb profit. For example, if your employment income uses up your personal allowance and pushes you into the higher rate tax band, your Airbnb profits may be taxed at 40 percent instead of 20 percent.
Even if tax has already been deducted at source (such as through PAYE), it still needs to be reported so that HMRC has the complete financial picture.
Calculating your tax bill
Once you’ve entered all relevant figures into your return, HMRC’s online system will calculate your tax liability. If you use software, it will also estimate the tax owed. The key figure is your total taxable profit from Airbnb after expenses.
You will also be assessed for National Insurance contributions, particularly if Airbnb hosting is your main source of income. Most property landlords are not liable for Class 4 National Insurance, but Class 2 contributions might apply if your letting activities count as a business.
It’s important to understand these nuances or seek advice if you’re unsure how to classify your activity.
Making payments
Your tax bill must be paid in full by 31 January following the end of the tax year. If your bill exceeds £1,000, you may be required to make payments on account. These are advance payments toward next year’s tax liability and are due in two instalments:
- 31 January
- 31 July
Each installment is usually half of the previous year’s tax bill. For example, if your 2024/25 tax bill was £2,000, you would make two £1,000 payments toward your 2025/26 bill. If your actual income decreases in the following year, you can apply to reduce the payments on account.
Failing to pay by the deadline results in interest and penalties, so it’s essential to budget throughout the year.
Managing cash flow as a host
One of the biggest challenges for hosts is managing cash flow. Airbnb income can be irregular, depending on seasonality, demand, and cancellations. This unpredictability makes it difficult to set aside the right amount for tax.
A practical approach is to save a fixed percentage of your Airbnb income each month. Many hosts save between 20 and 30 percent, depending on their other income sources and estimated tax band. Keeping this money in a separate account helps prevent accidental spending and ensures you’re prepared when the tax bill arrives.
Also consider using accounting tools to forecast your tax liability. These can help you visualise how much you owe based on current earnings and make adjustments early.
Staying compliant year after year
Once you’ve submitted your first Self Assessment return, you must continue filing each year unless HMRC tells you otherwise. As your Airbnb hosting continues, review your setup regularly to ensure compliance.
- Update your income and expenses monthly.
- Monitor changes in HMRC policy or rental legislation.
- Keep digital and physical records of all relevant financial data.
If you stop hosting temporarily or permanently, inform HMRC so they can update your record. This avoids unnecessary reminders or tax return obligations.
Also be mindful of changes in your income pattern. If Airbnb becomes your primary income source or expands to multiple properties, your tax obligations may change. What started as a side hustle could grow into a property business with more complex reporting requirements.
What happens if you make a mistake?
If you submit an incorrect tax return, HMRC allows you to make changes within 12 months of the original filing deadline. For example, if you filed for the 2024/25 year by 31 January 2026, you have until 31 January 2027 to amend your return.
You can correct errors online or by contacting HMRC. It’s always better to fix mistakes voluntarily. Deliberate under-reporting or concealment of income can result in serious penalties and even investigation.
If you realise you’ve overclaimed expenses or forgotten to report some income, take prompt action to correct it. HMRC values transparency and often takes a more lenient approach when the taxpayer is proactive.
Dealing with HMRC queries
Sometimes HMRC may contact you for clarification or additional documentation. This does not necessarily mean they suspect wrongdoing. It might be a random check or triggered by inconsistencies between your return and third-party data.
To respond effectively:
- Remain calm and professional
- Provide the requested documents
- Explain any discrepancies clearly
If you’re unsure how to respond, consult a tax professional to guide you through the process. It’s important to answer queries promptly and thoroughly to avoid delays or escalation.
Considering future changes
Tax laws and property rules evolve regularly. Stay up to date with the latest guidance from HMRC and any changes in local authority regulations regarding short-term letting. This includes licensing requirements, insurance expectations, and health and safety compliance.
As more people turn to platforms like Airbnb, the government may introduce additional rules to ensure fairness and proper taxation. Being proactive about compliance will ensure that any future changes cause minimal disruption.
Scaling your Airbnb operation
If you decide to expand your Airbnb activity, such as letting multiple units or operating in different locations, your tax and legal responsibilities may grow more complex. You might need to consider business structure changes, VAT registration, or specialist accounting support.
A larger operation may benefit from registering as a limited company. While this adds administrative duties, it can offer tax planning opportunities. However, this route is not suitable for everyone, so weigh the pros and cons carefully.
Regardless of size, clear documentation, accurate reporting, and regular reviews remain essential. Whether hosting one room or several properties, the key to success is consistency and awareness.
Ongoing best practices
- Keep detailed monthly records of income and expenses
- Use accounting tools or spreadsheets to monitor profits
- Register for Self Assessment if Airbnb income exceeds allowances
- File your return by the relevant deadline (paper or online)
- Declare all income sources accurately
- Save a percentage of your earnings to cover tax
- Stay informed about changes in tax law
- Seek advice when your situation becomes more complex
With these habits in place, Airbnb hosts can continue to generate income confidently and stay compliant with UK tax rules. A solid understanding of the Self Assessment process and how to manage deductions gives you more control over your financial outcomes.
Conclusion
Airbnb hosting can be a rewarding source of income, but with it comes the responsibility of understanding and meeting your tax obligations. Whether you’re letting out a spare room or managing multiple short-term rental properties, staying informed about how your income is taxed and which expenses are deductible is crucial for keeping your tax bill accurate and lawful.
The first step is knowing whether your Airbnb income exceeds the trading allowance or qualifies for the rent-a-room scheme. From there, registering for Self Assessment and filing the appropriate forms, including the SA105 for property income, ensures that your income is properly declared. Throughout the year, maintaining clear and consistent records of your earnings and expenses is key to claiming allowable deductions and reducing your taxable profit.
Common deductible expenses range from mortgage interest and utilities to cleaning costs, insurance, and platform fees. The more precisely you allocate these expenses to your Airbnb activity, the better positioned you are to avoid overpaying tax. However, not every cost qualifies, so it’s important to understand the rules and avoid making unsupported claims.
Once it’s time to submit your Self Assessment tax return, make sure to include all sources of income, calculate your tax correctly, and pay any owed amounts by the deadline. This includes staying on top of payments on account if applicable, and planning your cash flow accordingly to avoid penalties or interest charges.
As your hosting activities grow or change, review your tax position regularly. If Airbnb becomes your primary source of income or you expand to manage multiple properties, you may need to reassess your business structure or seek professional advice. Compliance is not a one-time event, it requires ongoing attention to changes in tax law, local regulations, and your own circumstances.
By understanding the basics of Airbnb taxation and proactively managing your obligations, you can enjoy the benefits of hosting while avoiding costly mistakes. The key is to remain organised, informed, and responsive to your evolving responsibilities as a host. In doing so, you can focus on offering a great experience to your guests confident that your tax affairs are in good order.