The rise of the sharing economy and the success of platforms such as Airbnb, have seen many more part-time landlords making income through short term rentals.
However, as Andrew Verlander from FBC Manby Bowdler’s Residential Landlord’s team advises, this apparent ease of letting does not take away the responsibility to understand and keep up with relevant rules and regulations. He comments:
Changes to rules relating to short term lets could see part-time landlords hit by a new tax bill from next year if they let out their whole property.
Homeowners can currently earn up to £7,500 per year tax free by renting a room to a lodger and in recent times, a new wave of landlords has emerged who have capitalised on the popularity of Airbnb and in doing so, have used this tax break to offset income when they let the whole of their home out for short stays. Whether it’s property owners in SW London making a killing during the Wimbledon tennis tournament, or hard-up mortgage slaves staying with family and friends while letting out their home for occasional nights to supplement their income, many are making use of the ‘rent a room’ allowance to offset rental income.
This is fine for now, but new legislation drafted by HMRC, and anticipated to be confirmed in the Autumn Budget later this month, will mean the tax break is only allowed if the letting is for just part of the property, and the owner is living there for at least part of the stay. The change could mean an extra tax bill for landlords of as much as £3,000 per year as a result. Such landlords, however, will be able to benefit from the £1,000 per year allowance for trading and property income introduced in the Chancellor’s 2017 Budget.
The measure is intended to make sure that the ‘rent a room’ relief is focused on its original purpose – namely to encourage home owners to make unused rooms available for lodgers.
Assuming the legislation is passed, any landlord who feels that they might be affected by it would be well advised to seek expert legal guidance. Airbnb is great in many ways as it provides a recognised agreement when other people share or takeover over your home, but it’s naïve to imagine that all your interests will be protected. As well as keeping up to date with the tax side of things, you’ll want to be sure you have the right insurances in place and be aware of any local bylaws which you’ll be required to comply with. In London, for example, there’s a maximum 90 days per year rule that applies to short term rentals – failure to do so can result in penalties of up to £20,000 for each unlawful letting and similar bylaws exist elsewhere in the country.
FBC Manby Bowdler’s team of residential lettings experts can easily guide you through the maze of ever-changing rules and regulations and ensure that your experience as a landlord is a positive and profitable one!
For more information, contact Andrew on 01902 392406 or firstname.lastname@example.org