HMRC crackdown on Airbnb holiday lets could see landlords face fines or prison time

Couple impressed by their holiday rental
-Credit: (Image: Getty Images)


Personal finance experts have issued a warning over rules concerning holiday homes that could result in hefty penalties if broken.

HMRC has begun cracking down on landlords who deal in short term rental properties, specifically those who fail to declare their revenue to the tax man. According to Tax expert Andy Wood, the national payments authority has already launched thousands of investigations.

Those who rent out holiday accommodations are already required to pay income tax at the standard rate on any money earned. However, Andy highlights that the HMRC is now "paying close attention" to those who don't correctly report their earnings.

Those who fail to meet their tax obligations risk serious consequences, including fines equating to 30 per cent of outstanding tax owed. Depending on the situation, serious cases can see people be handed prison sentences of varying lengths, ranging from five months to seven years.

As reported by Bristol Live, he said: “HMRC has opened almost 2,000 investigations into landlords letting out via Airbnb or other short let platforms. The number of tax inquiries has increased significantly, rising from 95 in 2021-2022 to 2,000 in 2023-2024.

Family entering a holiday home
Those who rent out holiday homes face HMRC scrutiny -Credit:Getty Images

"This twentyfold increase indicates that tax authorities are paying much closer attention to people's tax situations and are conducting more investigations accordingly. In serious cases, people can be handed a prison sentance

"In the previous year, the number of inquiries was 400, so it's clear that taxpayer scrutiny is increasing rapidly. Given the increased attention from tax authorities, it's important for taxpayers to make sure they are meeting their tax obligations.”

Andy, from Tax Degens, said: "With HMRC paying close attention to undeclared rental income, landlords should accurately report their earnings to avoid penalties of up to 30 per cent of the tax due. Understanding the tax rules for Airbnb hosting is important for landlords.

"The rent-a-room scheme allows a tax-free allowance of up to £7,500 per year for renting out rooms in your main home, but different rules apply for those renting out separate properties.

"Owners should calculate their taxable income by deducting allowable expenses such as property insurance and maintenance costs from their total rental income. It’s important only to claim legitimate expenses that can be backed up by evidence to avoid issues during tax audits.

"Not declaring rental income can lead to severe consequences, including large fines or even imprisonment in extreme cases. Property owners must meet their tax obligations to avoid these outcomes. This includes short-term rental hosts on platforms like Airbnb, subject to the same tax rules as traditional landlords.

"Landlords should register for self-assessment with HMRC and keep accurate records of their rental income and expenses. Seeking advice from tax professionals or accountants is highly recommended to ensure compliance with tax laws, especially for holiday-let income.

"It’s important for owners to understand allowable expenses since they significantly affect taxable income from rental properties. Allowable expenses include various costs like mortgage interest, utilities, and advertising, but it’s important to differentiate between allowable and non-allowable expenses. For example, costs related to property improvements or personal use are not allowable and cannot be deducted.

"One common misconception is that minimal rental activity does not require reporting to HMRC. In fact, all rental income must be reported, regardless of how often properties are rented out.

"Another common assumption is that income from platforms like Airbnb doesn’t need to be reported if there's no formal documentation like a 1099 form. However, this income is still taxable and must be reported. Similarly, accepting cash payments does not exempt landlords from their tax responsibilities; all income must be accurately declared."

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