Technology

Budget 2017: Tax increase on cards for Airbnb hosts

Posted by Phil Davies on
Budget 2017: Tax increase on cards for Airbnb hosts

Homeowners who rent out a spare room on Airbnb reportedly face a big tax bill.

A note buried in the budget red book reveals that the government wants to deny ‘rent-a-room’ tax relief to people who use the home lettings website.

The allowance lets anyone earn £7,500 a year from lodgers without having to pay income tax.

However, it says the government will consult on a proposal to “redesign” the relief to make sure that it is targeted at longer-term lettings.

“This will align the relief more closely with its intended purpose, to increase supply of affordable long-term lodgings,” it says.

This could involve reducing the relief or removing it entirely.

Any move to deny the rent-a-room relief to people who use Airbnb and similar websites could cost homeowners £3,375 a year, The Times reported.

A higher-rate taxpayer who earns £500 a month renting out a spare room on Airbnb does not have to pay a penny to the Treasury at present. If the relief is denied to advertisers on the website, such a taxpayer would have to pay £2,400 a year in tax.

More than 25,000 people have spare rooms listed to rent on Airbnb in London alone.

Sally Walmsley, of the Residential Landlords Association, told the newspaper: “As rent-a-room [tax relief] was introduced to increase the supply of affordable long-term lodgings, it would appear the government review is taking place in direct response to the popularity of short-term letting sites.

“No timescale for the consultation or review has been set, but measures could be announced in the autumn budget, to take effect as soon as next year.”

Hotels have also accused the government of allowing Airbnb to benefit from generous tax policies that give it an edge in attracting tourists.

Travellers who book a room in London save £80 on average by using Airbnb over a hotel, but about a third of this saving is because of the tax advantages, a study by the Financial Times found.

Hotels have to pay high business rates and charge VAT on stays, while property-owners who rent out rooms through Airbnb receive tax breaks, such as the rent-a-room relief, that help to make its accommodation cheaper.

Research by Morgan Stanley recently found that hotels’ occupancy rates were suffering under the Airbnb effect.

Airbnb said that “home sharing” helped to cut the cost for travellers and earned hosts extra income.

A spokesman for the website said last night: “We look forward to working with the government to learn more about this consultation, so we can work together to support regular people who share their homes.”

Comments

This is a community-moderated forum.
All post are the individual views of the respective commenter and are not the expressed views of Travolution.
By posting your comments you agree to accept our Terms & Conditions.