Airbnb hosts face tax probe and penalties for undeclared income

Author: Barry Jefferd
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HM Revenue & Customs (HMRC) are looking into the earnings of Airbnb hosts. Those not declaring their income correctly could face penalties and sanctions.

This is part of routine activity to identify individuals not paying the correct amount of tax on their income.

Airbnb, which allows property owners to advertise holiday lets, has been required to share information about users income with HMRC. HMRC will be reviewing data that goes as far back as 2017/18.

‘Nudge’ letters act as reminder to declare income

HMRC has sent hundreds of ‘nudge’ letters to remind people of their responsibility to disclose taxable income. Letters should not be disregarded, and you should seek advice at the earliest opportunity.

Those making money by letting out property via an online platform such as Airbnb, who perhaps don’t realise that they need to pay tax on this income, should be aware of their obligation to report income to HMRC and to get their tax right.

Worth bearing in mind is that the annual £1,000 trading allowance can be offset against property income, meaning anyone can make an additional £1,000 of income from property without being taxed.

If you are renting a room in your main home, and you meet certain qualifying conditions, you may be able to claim rent-a-room relief which allows you to earn up to £7,500 a year tax-free.

The trading allowance and rent-a-room relief cannot be claimed together. Where income exceeds either threshold it will become taxable.

If HMRC uncovers undeclared income and unpaid tax, it could look into your affairs going as far back as 20 years under the discovery assessment time limits.

Penalties, sanctions and the Let Property Campaign

Penalties and sanctions are likely to be at HMRC’s discretion and will largely depend upon how careless the taxpayer has been, or whether failings are an innocent oversight.

Landlords with undisclosed income can report this to HMRC via the Let Property Campaign, which allows them to get up to date with their tax affairs in a simple way. Disclosure prior to an investigation may result in lower penalties.

Spotlight on short-term holiday lets

The attention on undeclared property income comes as HMRC shines a wider spotlight on short-term holiday lets. So, what else is happening?

Plans are in consultation to tackle housing shortages in popular tourist areas, by requiring holiday lets to have planning permission. The planning permission, if granted, will reflect a change of use from dwelling only, to holiday let.

The Government is also planning to create a register for short-term lets. Registration will likely carry a cost for those required to be on it.

Helping you to get your tax right

Our expert tax advisers will help you to stay one step ahead of everchanging tax ‘goalposts’.

We can help you to compliantly reduce your tax burden, and to manage your reporting, filing and payment obligations effectively. We can also eliminate confusion when it comes to dealing with HMRC.

If you have received a nudge letter from HMRC, or you believe that the information HMRC holds in relation to your tax affairs may be incorrect, it is important to seek professional advice.

For advice and support with property-related tax issues, and to arrange a free initial consultation, contact us today.

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