Yes. There is no version of this where Airbnb income is exempt because it comes through a platform rather than a letting agent, or because it is paid in nights rather than months. HMRC treats it as property income, and property income is taxable.
The questions that actually matter are how much of it is taxable, what you can deduct before you get there, and whether you need to tell HMRC about it at all. Those answers depend on numbers and thresholds that HMRC reviews and changes, so we are not going to state figures here that might be wrong by the time you read this. What follows is the shape of the rules. Check the current figures on GOV.UK before you file anything, or ask an accountant to do it for you.
What counts as declarable income
Everything a guest pays you counts, not just the headline nightly rate. That includes cleaning fees you charge separately, any damage deposit you keep, and extras like a cot or a late checkout fee. If you run the property through a management company, the income is what the guest paid, not what lands in your account after the management fee is deducted. The fee is an expense, not a reduction in income, and the two are treated differently on a tax return even though the effect on your bank balance looks the same.
If you co-own the property, income is normally split according to ownership share, though married couples and civil partners have specific rules about this that are worth checking rather than assuming.
The property allowance
There is a property allowance that lets you earn a small amount of property income each year without declaring it at all, provided you have no other deductions you want to claim against it. If your short-let income for the year is under that threshold, you may not need to do anything.
The catch is that you cannot use the allowance and claim your actual expenses at the same time. You choose one or the other for the year. For most landlords running a short let with real costs, cleaning, management fees, utilities, actual expenses will be worth more than the flat allowance, so the allowance mostly matters to people with very light letting activity. Do not assume you qualify for it without checking the current threshold, because it is not large.
What you can deduct
If you are declaring actual expenses rather than using the allowance, a wide range of costs are deductible against your rental income, provided they are wholly and exclusively for the letting. In broad terms this typically includes:
- Management or agency fees
- Cleaning and laundry costs between guests
- Utility bills, council tax or business rates on the property, and broadband
- Repairs and maintenance that keep the property as it was, rather than improve it
- Insurance for the let
- Platform fees charged by Airbnb or Booking.com
- Replacing items like furniture or appliances, under specific rules for what counts as a like-for-like replacement
Improvements are a different category from repairs and are usually treated as capital rather than income expenditure, which affects tax differently and often later, on sale. The line between a repair and an improvement is not always obvious. Replacing a broken boiler with an equivalent one is generally a repair. Adding a boiler where there was none, or upgrading the whole heating system, tends to tip into capital. If you are not sure which side of the line something falls, ask an accountant before you file rather than after.
Furnished holiday lettings: a separate regime, and one worth checking carefully
For years, short lets that met certain conditions, letting availability across most of the year, actual letting for enough of it, and no single guest staying too long, could qualify as a Furnished Holiday Letting, a category with its own, generally more favourable tax treatment covering things like mortgage interest relief and certain capital allowances.
This is an area that has been subject to significant reform, and the rules around it have changed. Whether the FHL regime applies to you, and in what form, is something you need to check directly against current GOV.UK guidance or with an accountant. Do not rely on anything you read elsewhere, including here, as settled. This is exactly the kind of detail that is worth a proper conversation with someone qualified before you plan around it.
When self assessment applies
If you have income from property, including short lets, and it is above the point where the property allowance would otherwise cover it, you generally need to register for self assessment and file a return, even if you are already employed and taxed through PAYE on your main income. The return is where you declare the rental income, claim the expenses or allowance, and the tax due is calculated alongside everything else you earn that year.
Registering late has consequences, and so does filing late once you are registered. Both are avoidable simply by knowing you need to do it before the deadline arrives, which is really the entire point of this post. If you have just started letting a property short-term and have not thought about self assessment yet, that is the first thing to check, not the last.
Mortgage interest is treated differently now
If the property has a mortgage, interest is not deducted from rental income before tax the way it used to be for most residential landlords. Instead, relief is given as a reduction to your tax bill at a set rate, applied after the tax on your rental profit has been worked out. This changed several years ago for standard residential lets, and it changes the actual return on a mortgaged property more than most landlords expect. Furnished Holiday Lettings have historically sat outside this and followed different rules, which is one more reason the FHL question above is worth settling properly rather than assuming.
VAT, and why it rarely bites but can
Most individual landlords letting one or two properties will never come near VAT registration, because it only becomes relevant once turnover from taxable supplies passes a registration threshold. Short-let accommodation is a taxable supply, unlike most long-term residential letting, which is exempt. If you run several properties, or one property earning a great deal, this is worth checking rather than assuming does not apply to you, because the threshold is based on turnover, not profit, and a full calendar of short lets in central London can generate more turnover than people expect.
What we do, and what we do not
We manage the property. We report income, expenses and our fee to you every month in writing, which is the raw material an accountant needs to do your return properly. What we do not do is give you tax advice, because we are not accountants and the cost of getting this wrong is your money, not ours.
If you are setting up a short let for the first time, the two calls worth making before the first guest checks in are to an accountant, about how the income will be taxed, and to us, about what the property can actually earn.
Get in touch with the postcode and we will tell you what to expect on the numbers we can speak to.
This is general information about how property income tax works, not tax advice, and figures and thresholds change. Verify anything specific against current GOV.UK guidance, and speak to a qualified accountant about your own circumstances before filing a return.