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Could you earn an extra £3,000 in 2019 by becoming an Airbnb host?

Plus what does renting your home out mean for your tax bill and mortgage?

Renting out a room or property for just 36 nights a year earns the average Airbnb host £3,100, according to the holiday rentals site.

Airbnb, which celebrated its 10th birthday in August 2018, currently has 223,200 active listings in the UK.

So, could you get a slice of the profits? And if you do, what might it mean for your tax bill and your mortgage?

Which? explains what you need to bear in mind before letting with Airbnb.

 


How to become an Airbnb host

The process of listing your property on Airbnb is pretty easy. You need to register with the site by providing your email address and setting up a password.

You can then make a profile for your room or property, specifying the location, type and capacity. You can also upload pictures and decide whether you want to be able to approve prospective guests before they can make a booking.

When creating  your profile, be sure to consider:

  • Your property’s selling points: is it near any historical landmarks, areas of natural beauty or great pubs?
  • How guests can navigate the area: what’s the local transport like?
  • Access to the property: do guests need to pick up a key/cart luggage up several flights of stairs/wrangle with burglar alarms?
  • Your cancellation policy: you can usually pick from three options – flexible, moderate or strict.
  • Restrictions: can guests only access separate rooms? Is noise prohibited past a certain time? Can they invite other people over?
  • Price: check other hosts’ prices for similar listings in your area and go from there.
  • Whether you want to include any extras: a free bottle of wine, a welcome note, local maps and other extras can do wonders for positive reviews.

Will you have to pay income tax on your Airbnb earnings?

The amount of tax you pay from Airbnb profits will depend on how much you earn and what you’re renting.

If you’re renting out a room within the property you live in, you can make use of the rent-a-room scheme. This allows you to earn up to £7,500 in each tax year from letting out a room in your home without paying tax on it.

Any income above £7,500 will be taxed, and you’ll have to submit a self-assessment tax return to HMRC. You have to opt in to the scheme in order to claim the allowance.

If you’re letting an entire property – or you don’t opt in to the rent-a-room scheme – you’ll pay tax through self-assessment.

Rental income is taxed on your profits, so you’ll need to take your earnings and then deduct your expenses. These can be things such as paying for building insurance, accounting fees and cleaning.

You may also be able to take advantage of the ‘property allowance‘, where you can earn up to £1,000 tax-free from your property. This can’t be used at the same time as the rent-a-room scheme, but can cover money you make from renting out your driveway or garden, or hiring out your lounge for filming or to let people watch a sporting event.

How long can you let for?

In the UK, Airbnb hosts in Greater London are not allowed to let their property for more than 90 days a year. This applies to entire properties, and is enforced by Airbnb.

To rent it out for longer than this, you’re likely to need ‘material change of use’ planning permission for your local authority – and Airbnb will need evidence of this before the limit is extended.

Properties in England and Scotland will be deemed as self-catering – and therefore subject to business rates – if they’re available to let for 140 days or more per year.

If a property in Wales is available to let for 140 days or more, or is actually let for 70 days or more, it will also be subject to business rates.

Properties in Northern Ireland might require a certificate from Tourism NI – this is necessary for anyone providing ‘tourist accommodation’.

You’ll need a certificate if the rental fits into the categories of tourist accommodation – a bed and breakfast, for example, is a rental that offers overnight accommodation and a cooked breakfast.

Do you need special insurance to be an Airbnb host?

Airbnb’s own insurance – the host guarantee – covers up to $1m (£785k) of damage caused by guests. However, cash and securities, pets, personal liability, shared or common areas and high-value items such as jewellery, collectibles and artwork are all exempt.

Most home insurance policies won’t cover renting out rooms as standard. Some insurers may agree to cover you depending on whether you’re renting out a room or a whole property, how often you’re planning to rent, the number of people staying, and your previous claims history.

With this in mind, it could be worth contacting a specialist broker to find a suitable policy.

Will you have to change your mortgage?

If you’re changing the use of your property you should tell your mortgage provider.

Breaking the terms of your mortgage could mean you’ll get fine, or (in rare and extreme cases) the lender could order repossession.

If you let a room in your home

Renting out a room in the property you live in shouldn’t require you to change your residential mortgage.

However, you might have to consider whether you’ll need to pay tax on the income you receive, as mentioned above.

If you have a leasehold property, you may need to check with your freeholder before you start letting it out, as some leases ban this.

If you let an entire property

The terms of some residential mortgages don’t allow letting on Airbnb, so you’ll need to check this with your lender.

There are a few lenders who will accept applicants who want to let out their property via short-term websites like Airbnb.

Tipton & Coseley launched a residential mortgage last August for a second home that can be let out on an Airbnb basis for an unlimited period.

You may be also able to apply for ‘consent to let’, where your lender allows you to let but remain on your existing mortgage.

However, often they’ll want to move you onto a buy-to-let mortgage. This is because buy-to-let properties present more risks to lenders as you’ll usually be relying on rental payments to pay your mortgage.

There tend to be tougher affordability criteria and higher rates on buy-to-let mortgages, so make sure you consider all of the factors before you commit.

Get the right mortgage for you

Finding a mortgage deal to suit your circumstances might seem like an overwhelming task, especially when there are lots of factors to take into consideration.

A whole-of-market mortgage broker can help find the best deal for you, as well as helping you to come up with a plan if you’re not quite ready to apply yet.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

Categories: Money, Mortgages & property

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