Airbnb hosts - even those using just a spare room for occasional letting - will be amongst those subject to new reports sent to HM Revenue and Customs.
From January 1st Airbnb and other short let platforms will be required to send data on their clients’ earnings to HMRC. The rule will apply not just to short let platforms but other so-called freelance systems in the gig economy, such as those for freelance taxi service Uber and freelance online content service Fiverr.
HMRC will then use this information to identify taxpayers who may be under-reporting their income. If HMRC finds that a taxpayer has not reported all of their income, they may be subject to a penalty of up to 30 per cent of the tax owed - in addition to paying the outstanding tax itself - or ultimately prosecution. The Revenue says an estimated £1.2 billion in tax is lost each year due to evasion in the gig economy.
Earlier this year Airbnb posted on its website a warning that it was sharing data with HMRC, going back as far as the 2017-18 tax year. However, anyone letting complete properties on Airbnb can only make up to £1,000 a year before tax, which is protected by the ‘trading allowance’ while any profits above this threshold must be declared.
Those letting a room only via a short let platform or through some other system, and abiding by the rules of the government’s Rent A Room initiative, can earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation. This is halved if the person shares the income with a partner or someone else.
Airbnb says landlords should allow tenants to sub-let rooms
Airbnb says the large majority of private tenants want to boost their income, including through sub-letting rooms in their homes. In a statement issued on the back of the Renters Reform Bill debates over tenant finances, Airbnb says that as winter and the prospect of increasing energy bills approaches, the cost of living is set to once again increase for many households in the UK.
It also claims that for renters, this is compounded by an increase in rental prices, with two thirds of renters responding to an Airbnb survey claiming they are experiencing a rent increase in the last two years. As a result, almost 80% of renters are looking for ways to supplement their income amidst rising living costs, according to the Airbnb study.
The short lets platform says in its statement “very few renters, however, are able to share space in their homes as a means to make ends meet. In fact, over half (55%) of renters say they would share a spare room if they were allowed to do so, but only a fraction say that they believe their landlord permits it. For many homeowners, sharing a spare room on Airbnb is a lifeline in challenging economic times, providing a secondary source of income that helps families make ends meet. Almost four in 10 Hosts on Airbnb in the UK say their hosting income helps them afford their own home (39%) and the rising cost of living (38%). The idea for Airbnb was born after the founders needed a way to earn additional income, following an increase in their rent. Today, the average UK private room Host earns £2,200 last year, the equivalent to almost two months worth of the average UK rent. Opening up the opportunity for renters to let their spare rooms would offer an invaluable financial boost, helping renters stay on top of rental and living costs and in the homes they live in.”
The research also looked into other things renters wish they could do, including wanting to be able to decorate their home (46%), wanting to be able to choose the tradespeople who service their home (24%), and being able to change furniture (18%).
Amanda Cupples, General Manager of UK & Northern Europe at Airbnb says “Airbnb was born during an economic crisis when our founders couldn’t afford to cover an increase to their rent. Since then, Airbnb has become an economic lifeline to Hosts and yet many renters in the UK cannot access the same opportunity. Sharing a spare room on a short-term basis can allow renters to boost their income and help them with the increasing cost of living. We encourage renters to check the terms of their tenancy agreements and with their landlord to see if home sharing is a possibility."
A Third of landlords plan to increase rents, survey suggests
Four in 10 landlords say they already increased rents over the past 12 months One in three landlords plan to increase rents amid rising costs, according to the Deposit Protection Service (DPS).
A survey of more than 1,000 landlords by the DPS has revealed that three quarters, or 75%, of respondents planning to remain in buy-to let during the next few years had either increased rents during the past 12 months (40%) or were planning to do so in the near future (35%).
“Demand for rental property remains high, and our survey suggests most landlords see a future in the rental market,” said Matt Trevett (pictured), managing director at the Deposit Protection Service. “However, landlords have also told us that their costs have increased recently, particularly as a result of higher interest rates – and it seems a large proportion are raising rents to cover their expenses. Clearly, increases to interest rates and the cost of living will also be affecting some tenants, and we’d encourage both renters and landlords to have an open and constructive dialogue about financial pressures in the current economic climate.”
Meanwhile, the DPS survey also found that almost three quarters of landlords, or 72%, agreed that keeping rents in line with their local rental market was an influential or very influential factor in their decision to increase letting prices.
Around two thirds, or 68%, said that increasing costs relating to legislation and compliance were a key factor in their decision, with 62% mentioning increasing maintenance costs, and 55% saying rent rises were necessary because of increasing risks, such as the proposed abolition of no-fault evictions. More than half, or 54%, said that the requirements of mortgage lenders, such as financial stress testing and affordability requirements, did not influence their decision, with 53% saying that increasing costs of letting agents did not affect their thinking either.
Paul Fryers, managing director at specialist buy-to-let lender Zephyr Homeloans said “It’s interesting to note that, although there is a perception that costs associated with securing a mortgage and using a letting agent have increased, most landlord survey respondents do not think those costs affected their decision to increase rents. It seems interest rates and broad market pressures have been more decisive in the trend along with inflationary pressures on maintenance costs.”