How to tax AirBnb income - tips and tricks [London]

[Ena13]

Hello fellow Hosts,

I have a few questions regarding taxes in the UK and having few listings on Airbnb.

I am a fairly new host, I have started renting out my spare room in March this year, and I am aware of the £7500 tax "relief" before I need to declare the Airbnb income. A couple of months ago I listed another property under my account, it is a furnished 2 bedroom house and the whole property is being rented, I am a property manager for this house, and I'm handling all the work as the owner is traveling around the world. The agreement was to share the profit, but with cleaning fees and VAT included in my fee (if applicable).

My questions are:

1. Do I need to pay VAT? (I came across the fact that it only needs to be charged if the income exceeds £85000)

2. Since cleaning fees count as income, is it possible to deduct them as an expense (tax deduction) - so they wouldn't count as profit (because it's not) and therefore not be taxed?

3. How do you file your taxes, alone or do you have an accountant? 

Thanks in advance for all the information, I am sure all the tips and tricks will be helpful for many people here! 🙂 

Best,

Ena

[Stephanie]

Hiya @Ena13 ,

Great topic, I'm sure it will be super useful to our London hosts! Perhaps some of our veteran CC's can help on this one? @Paul1255 , @Gordon0 , @Alon1 , @Roberta2 , @Yadira22  and @Huma0 ? 

Many thanks,

Stephanie

[Roberta2]

Hi @Stephanie  and @Ena13 

I rent only a room, so I keep my income under the £7500 - I block the room when family comes over, so works out OK.

I would suggest you get an accountant, at least for the 1st year, as I think you could get come tax relief on costs - like cleaning products. 

Tax is a complicated thing, and as it is affected by your other income (if you have any other part time or full time job), it would be safer to speak with someone that knows the ins and outs 🙂

Roberta

[Gordon0]

@Roberta2 makes a good point. And, for the record, you cannot claim relief on costs if you are participating in the 'rent a room' scheme.

[Roberta2]

Hi @Gordon0 

Yes, I know about the room, but not sure what can be claimed on the full property.

Maybe even bills could be claimed?

Again, I would ask a good accountant, I think would be money well spent.

[Gordon0]

I suggest having a word with an accountant, @Ena13, as some of these tax rules can't be 'mixed and matched', and you do not want to fall foul of unpaid tax 'fines'.

While I only have the one room, I have a number of buy-to-let properties, this means I let an accountant take care of the paperwork. I pay £500 a year for this, which in itself is deductible.

Be careful with any info people give you on the internet; check it twice, and again.  

[Ena13]

Thanks to everyone for their replies, and the information. I will definitely get an accountant, this is the safest and most convenient way as it seems.

Thanks again!

Ena

[Alon1]

@Ena13 

I don't use an accountant after the one I originally consulted evaluated my case and concluded:

"Frankly, because you only have one property, you don't need to pay me a £ 500 annual retainer. You can easily do Self Assessment."

I then phoned HMRC and was given the 2 options: 

1) Income minus Expenses.

2) Rent-A-Room Scheme.

I've exclusively utilized the latter. It's much simpler, and now (£ 7, 500) plus Personal Allowance £ 11, 500, means not paying on the first 19k. It's a pretty good deal.

In your case, it's more complicated, so accountant is clearly necessary as everyone else advises. 

[Yadira22]

Hi @Ena13 

Hope you are well and this is a great topic! 

We do our own bookkeeping and I do a personally try to put aside some time as to audit myself at the end of every month for personal reasons. 

On google sheets (as any changes made are automatically saved and can be shared with editing/viewing restrictions) we record every reservation confirmed (and cancelled but with any attached cancellation fees).

Confirmed date 

Name (first plus surname initial)

check in date

check out date

number of nights 

reservation code 

rate per night

cleaning  fee (among any other) 

Airbnb Fee 

total value of reservation 

notes on reservation 

this also allows us to ensure there no discrepancies between the reservation value and what has been paid by Airbnb! 

We close off at the end of the month and using calculations set on the sheet it self calculates reservation revenue and profits etc. 

this is our main sheet and all information feeds to another which allows us to calculate automatically the sales per room, per month, per quarter , occupancy etc.

You could go further and do this with ratings but honestly I do not have the time for this or the patience. 

Another sheet records the expenses and these are categorised (cleaning, products, laundry, uncategorised etc) 

We hand this to our book keeper or accountant as to ensure everything is fine and given my professional experience we usually have a couple of accountant friends who help on this (we do a lot of the admin work so pay them for the other elements of their roles and triple check everything every end of month and before handing them). All receipts are arranged by month and type of service they represent and archived. I try to be super organised as it just makes everything easier for me. 

I read somewhere that if the value of total made by your room is under £8k then it’s not taxable as mentioned above (not sure at all about this- as @Gordon0  mentions please verify over and over again). If exceeds this I would definitely recommend you register under sole trader or as a LTD company but of course please speak with a professional before- this is not my profession but I try my best regardless. 

Either way good luck to you! 🙂

[Ena13]

This is amazing, thank you so much Yadira!

I have been doing the same thing with the Google sheets (have almost exactly the same structure), and was thinking of just handing it to the accountant.

Thanks for the great advice, and good luck to you too! 🙂