Expanding your Airbnb business into international territory can be intimidating. After all, foreign tax laws differ from the U.S., so renting property abroad can complicate your tax situation. However, if your prepared, renting Airbnb properties abroad can be a great way to earn extra money. Best of all, you’ll always have a place to stay in your favorite international locales. London is a very popular city for Airbnb rentals, however, there are some tax considerations for Airbnb hosts operating in the city. If you’re thinking about expanding your Airbnb business, you should know about London Airbnb requirements before you make a move.
Airbnb Regulations in the United Kingdom
If you rent out a property in the UK, you must pay taxes on your rental income. Non-residents only pay tax for their UK income, so they don’t have to pay taxes for any income generated outside the country. However, UK residents must pay taxes for all of their income, including foreign income.
<span”>If you live abroad for 6 months or more per year, you are classified as a ‘non-resident landlord’ by HM Revenue and Customs (HMRC), even if you’re a UK resident for tax purposes. A company is classified as a ‘non-resident landlord’ if it receives income from renting UK property and either the company is incorporated outside of the UK or its principal office is outside of the UK.
<span “>An important difference to note is that the UK tax year runs from April 6th to April 5th of each year, unlike the January to December US tax year.
Non-Residents of the United Kingdom
The UK classifies anyone who meets the following criteria as a non-resident:
- Spend less than 16 days in the UK.
- If you didn’t qualify as a UK resident for 3 previous tax years, you can spend up to 46 days without being classified as a resident.
- You work abroad full-time and average more than 35 hours worked per week. Also, you must spend less than 91 days in the UK including no more than 30 working days.
When you start renting out your property on Airbnb, you must tell HMRC and you may have to pay tax. If you don’t notify HMRC, you may be charged a penalty.
If you plan to use the Self Assessment method, you must first complete form NRL1i and submit it to the HRMC. Companies should use form NRL2i to ask HMRC to get rental income in full. Trusts should use form NRL3i.
Airbnb hosts in the UK must declare their rental income via a Self Assessment tax return. You can find the filing deadlines here.
Residents of the United Kingdom
Whether you are a resident of the UK depends on how many days you spend in the UK per year. The UK considers you a resident if:
- You spent 183 or more days in the UK in the tax year.
- Your only home was in the UK – you must have owned, rented, or lived in it for at least 91 days in total – and you spent at least 30 days there in the tax year.
UK residents are required to report income from Airbnb property rental on a Self Assessment tax return if you’ve earned:
●£2,500 to £9,999 after allowable expenses
●£10,000 or more before allowable expenses
You can write-off costs to reduce your taxable income. However, your allowable deductions depend on whether your property is a residential unit, a furnished holiday rental, or a commercial property.
If your profits from your Airbnb rental activity are over £5,965 and all of the following apply:
●being a landlord is your main job
●you rent out more than one property
●you plan to purchase more rental properties
Some hosts also have to pay Class 2 National Insurance. However, this only applies to hosts classified as business owners.
International Airbnb Tax Help
If your Airbnb business crosses borders, you probably have a complex tax situation. Many tax advisors don’t have expertise in this area, so finding qualified help is a difficult task. Unlike generic store-front tax firms, Shared Economy Tax offers specifically caters to sharing economy clients, like Airbnb hosts. Our experienced team of experts has been working with sharing economy entrepreneurs like you for years, so we have expertise in this area that other tax advisors simply can’t match. If you have questions about taxes for your London Airbnb, you can ask one of our tax pros in a no-obligation strategy session. Click here to request a complimentary one-on-one planning session with one of our professional tax advisors. You can also sign up for our complimentary tax tips newsletter using the form below.