UK: As the Friday 31 January self-assessment tax deadline looms, industry body the UK Short Term Accommodation Association [STAA] is alerting homeowners who rent out their properties or rooms when away or on a short-term basis, to understand their tax obligations and think about opportunities in the year ahead.
They believe there are three key things short-term hosts need to know about their tax entitlements:
- If you rent out your whole property there’s a £1,000 tax-free allowance.
If your total rental income [before expenses] from sharing economy activities or renting out your home when you’re away, is less than or equal to £1,000, you do not have to declare it to HMRC and you do not have to pay any tax on it. You do not need to do anything to qualify; it will apply automatically.
- In England, if your home is rented out for short periods totalling less than 140 nights, you will continue to just pay council tax. If you short-let your property for more than 140 nights, you will instead need to pay business rates.
If you are renting for more than 140 nights, your property will be rated as a self-catering property and valued for business rates. In some locations this will be more than council tax, in others it might be less.
If your property is in Wales, it will be rated as a self-catering property and valued for business rates if it is both available to let for short periods that total 140 days or more per year and actually let for 70 days.
- You can earn up to £7,500 a year from renting out a room in your home, for short periods, without having to pay any tax.
If you earn more than £7,500, you must complete a tax return [even if you do not do it normally]. You can choose to opt-in to the Rent a Room scheme, which will enable you to claim your tax-free allowance and you will need to let HMRC know this on your tax return.
If you choose not to opt-in to the scheme, you simply record your income and any associated expenses on the property pages of your tax return.
Please note, you cannot claim for both the Rent a Room scheme and whole property rental allowances. It’s one or the other.
On average, hosts in the UK earn £3,100 a year through short-term lets and more homeowners are expected to join them in the years ahead as it can be a great way to earn extra income from your most important asset. The sharing economy is forecast to grow by 30 per cent in 2020.
Merilee Karr, CEO of UnderTheDoormat and chair of the STAA, said: “To make the most of the fantastic opportunities that the sharing economy offers, it’s very important that hosts who rent out their whole home or just a room on a short-term basis understand the tax implications, take advantage of the allowances and declare the income they make above these thresholds.
“At the STAA, our aim is to take out the uncertainty of becoming a host and provide help to homeowners who want to participate in the short-term rental market so that it grows in a responsible and informed way,” she added.
The STAA offers host membership for £10 a month. For that, homeowners get access to advice and guidance on getting started which includes information about hosts’ legal responsibilities, best practice and a code of conduct.
For more information visit the UK STAA website here.