Call us on 01792 466 428
Book a FREE Consulation

December Questions and Answers

Q. I live near the Millennium Coastal Path and I’m considering renting out my spare room via Air BnB to walkers and cyclists. Would this be considered a business and should tell the tax man?

A. Firstly, it is important that you make sure you have a freehold arrangement on your property. A recent tribunal ruled that a flat owner was breaking the terms of her leasehold contract by renting out a room this way, since her contract stipulated that hers was a private residence only.

If you have a leasehold agreement each one is different so you need to check your own small print. If you plan to stay in your home while renting a room out, then this recent tribunal ruling doesn’t affect you.

As far as tax is concerned, The Government has been increasingly kind to the ‘sharing economy’ over the past few years. From April 2017 they implemented a £1,000 tax break for the first year for people who rent rooms via Airbnb – the same is true for people who offer goods or services via any other sharing economy platform.

So – as long as your income from room rental doesn’t exceed £1,000 you don’t have to declare it – so no lengthy tax forms to fill in.

If your earnings from renting your room goes above £1,000 you must declare it, but you can deduct the allowance first.

Also, under HMRC’s jauntily named Rent-a-Room scheme, landlords or tenants have access to a tax free allowance of £7,500 if they rent out a spare room. Again, if you are a tenant you must check your lease to see if this is permissible for you.

You would only qualify for Rent-a-Room relief if you don’t derive any taxable income other than rent-a-room receipts from any trade, letting or agreement.

Income from property rental isn’t usually seen as self-employment by HMRC, so class 2 National Insurance Contributions (NIC) should not be payable.