Are Airbnb hosts about to lose the tax break on income from renting out rooms in their home? Maybe.
Currently, individuals can earn up to £7,500 from letting out a room without paying any tax. The benefit - known as rent-a-room relief - is potentially under threat for short term lets following an announcement from the Government in 2017 that said it would consult on proposals to redesign rent-a-room relief to ensure it is “better targeted to support longer-term lettings”.
The government could use it to clamp down on people using spare rooms to generate income on the likes of Airbnb and Spareroom.
In the Treasury paper there are no specific proposals, but plenty of leading questions such as ‘Do you think that there should be differences in eligibility for rent-a-room relief according to type of letting activity, purpose or length?’
A change to the rules would be a huge blow to the tens of thousands of homeowners who currently take advantage of the tax break by offering short-term lets to people taking mini-breaks. In some cases a room may be let for a single night or weeks at a time. It is particularly lucrative for those who live near popular sporting events such as Wimbledon Tennis Championship, Henley Royal Regatta or Royal Ascot races.
In April 2016, the Government increased the relief, meaning hosts could earn up to £7,500 - more than the average room rental cost in every region of the UK, according to HMRC. The previous threshold was £4,250.
Results of the consultation, due to end in late February, are expected in the Spring Statement so we probably won’t have any firm rule changes until Budget 2018.
Paula Steele, managing partner at John Lamb Financial Planning, says: “There are already restrictions to the tax breaks available for properties that qualify as furnished holiday lettings. For instance, a property must be available for holidaymakers for at least 210 days in a year.
There are, at present, no such restrictions on the rent-a-room scheme.
“We are expecting new requirements being introduced such as a minimum length of stay.”