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 that 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 tax position now.
While many Airbnb renters principally let out spare rooms, out of 87,000 listings in London in March 2020, around 43,000 hosts appeared to hve 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 relief scheme.
For renters relying on rent a room relief, it seems likely HMRC may be in contact to validate the basis of this. If HMRC enquires, they would have to answer questions to confirm they are entitled to the exemption.
Others who have not declared their property income and whom the above conditions are not met would be best to contact HMRC before HMRC contacts them, to get their tax affairs in order. Potential penalties for voluntary disclosure of underdeclared tax are materially lower than those for prompted disclosures. In the best case, penalties for failure to declare income sources can be nil. But in the very worst case, penalties can be 100 per cent of the unpaid tax, although in practice they are usually lower. If there are any mitigating factors for the omission these should be identified and mentioned to HMRC.
If undeclared income is substantial it is always wise to get professional help with preparing a disclosure, before contacting HMRC.