Many people choose to let properties or rooms in their homes via Airbnb, and as some of these people are new to earning extra income this way, there is a risk that they may not realise they should declare this income for tax purposes.
Airbnb has confirmed in recent news reports it will be providing information for 2017/18 and 2018/19 to HMRC identifying people letting out property and their rental income receipts. Those letting properties via Airbnb should review their position now.
While many Airbnb renters principally let out spare rooms, out of 87,000 listings in London in March 2020, 43,112 hosts had at least one other listing. Some may be multiple rooms in their homes, but others will relate to buy-to-let properties, representing active businesses, and the income may have been substantial.
Many renters will have little to worry about as either:
- they have declared their rental income;
- they were below the annual £1,000 per person property income allowance; and
- they were letting rooms within their own home and the income was below the annual £7,500 per person limit, qualifying for the rent a room scheme.
For renters relying on the ‘rent a room’ relief, it seems likely HMRC may contact them as the amount received will be over the £1,000 limit. They would have to answer HMRC questions to confirm they are entitled to the exemption.
Others where the above conditions do not apply would be best to contact HMRC and get their tax affairs in order, before HMRC contacts them. Potential penalties for voluntary disclosure of underdeclared tax are materially lower than those for prompted disclosure. In the best case the penalty can be 0 per cent, in the very worst case 100 per cent of the unpaid tax, although in practice it is likely to be much lower. If there are any mitigating factors for the omission these should be mentioned.
If the amounts undeclared are substantial it would be wise to get professional help with a disclosure.