If you’re a landlord who lets a property through Airbnb, there’s some big news coming your way.
Airbnb are now sharing letting data with HMRC, with information about how much their hosts have been making through their website.
The company has been sharing data with HMRC about the earnings that UK hosts are making through their lettings since 2017, and the information was revealed in Airbnb’s end of year tax account details.
Airbnb Data Allows For HMRC To Investigate
The data that Airbnb are sharing will allow HMRC to start tax enquiries with anyone who they suspect has not declared the correct letting income for the 2017/18 and 2018/19 tax years.
This will help HMRC determine whether a host has been transparent about their earnings through Airbnb, but will also help them to identify anyone who has not paid enough tax on their Airbnb rentals income.
The deadline for HMRC to open an enquiry on an individual for the 2018/19 tax year is January 31st 2021.
However, the rules state that HMRC can actually go back up to 20 years if they suspect someone has been avoiding tax, especially if they have evidence that it has already happened recently.
The Difficulty In Tracking Online Income
It’s a well noted problem that some online earners (such as Airbnb hosts) haven’t declared all of their earnings to HMRC.
Online platforms such as Airbnb try their best to encourage hosts to pay the tax due on their earnings, but it’s clear that some hosts have been using the ‘trust system’ to their advantage.
Although, this all looks set to change with this big announcement…. and it explains why HMRC might be willing to investigate for a longer period of time.
If a host has been willing to bend the rules more recently, it’s very likely they might have inaccurately declared their tax for previous years too.
How Much Can You Earn Without Paying Tax?
An Airbnb Insight Report from 2017/18 reveals that the average Airbnb host in the UK would normally earn £3,100.
If the host was living at home and renting out a room in their main property, then this figure would fall into the room-a-room relief allowance.
The room-a-room allowance means that you can earn up to £7,500 without having to pay any tax on the amount – if the property is your main home.
However if an Airbnb host has multiple properties this allowance becomes much lower. Any income over £1,000 a year must be reported for tax purposes.
Therefore if an Airbnb host is earning over the £7,500 allowance for renting part of their main home, or is earning over £1,000 on a property other than their main home, they will need to declare this income.
Amending Previous Tax Returns
If you’ve submitted a tax return, and you can still amend it, you must make sure that you update this return as quickly as possible.
As we mentioned above the 2018/19 tax return can be amended up until January 31st 2021.
However, if you need to make an amendment for any years further back, then you’ll have to consider getting in touch with HMRC through their let property campaign.
The perks of using the let property campaign is that penalties are much lighter.
Rather than getting caught by HMRC in an investigation that they had initiated, you are coming clean to what’s happened.
If you let HMRC know the situation and make the correct tax payment before HMRC have even noticed that there is a problem, it’s likely that you’ll avoid a penalty all together.
If the property is overseas, you should use the worldwide disclosure facility instead.
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