As the popularity of home-sharing platforms like Airbnb grows, thousands of Brits who rent out their spare rooms may face HMRC fines in 2024 unless they declare this income in their Self Assessment. The UK government currently offers a tax exemption for those earning under £7,500 annually from renting a furnished room in their home. This equates to a monthly charge of £625 or £144 per week, with the exemption halved for income shared with a partner or another person.
From January 1, platforms such as Airbnb will be mandated to report their clients’ earnings to HMRC. This move could expose numerous casual landlords, particularly those surpassing the Rent a Room threshold, to potential tax liabilities.
Mike Parkes, Technical Director at GoSimpleTax, highlights the urgency of understanding tax obligations: “Whilst renting out a room can be a great way to earn an extra income, it’s important for those acting as landlords – even on a casual basis – understand that they still need to pay tax on what they earn.”
He warns that exceeding the £7,500 limit, an easy feat for those charging over £625 per month, requires declaring the income to HMRC and paying the corresponding tax. Parkes advises landlords to set aside funds for taxes to be prepared for the Self Assessment tax return due by January 31st.
Parkes also offers reassurance for those feeling overwhelmed as the deadline approaches: “With less than 60 days to go until the deadline, it can seem daunting to pay tax if money isn’t set aside but there are always options.” He suggests calculating the owed amount and discussing payment plans with HMRC, offering a more manageable approach to fulfilling tax obligations.