Allowable expenses for Airbnb hosts

Despite increasing regulation, being an Airbnb host still represents a lucrative opportunity to maximise occupancy and earn additional income from your home.

We’ve previously looked at the tax implication of become an Airbnb host, but in this article we’re specifically going to focus on the allowable expenses for Airbnb hosts.

Just like any other business, as an Airbnb host you can claim expenses against your tax liabilities and thus lowering your tax bill. However, unlike other businesses the rules around expenses for Airbnb hosts can depend on whether you are renting a room or rooms within your home (that you live in), or whether your Airbnb is classed as a furnished holiday let.

Rent-a-room scheme and allowable expenses. 

Before we get started, it’s worth noting that if you are renting out a room in the home that you live in, and claiming relief under the ‘Rent-a-Room Scheme’ you cannot claim expenses. As such, you’ll need to work out which is the most tax efficient option for you.

What expenses are allowed for Airbnb hosts?

You can reduce your tax bill as an Airbnb host by deducting many of these common tax deductible expenses:

• water rates
• council tax
• gas
• electricity
• insurance
• costs of services, including the wages of gardeners and cleaners (as part of the rental agreement)
• Airbnb fees
• accountant’s fees
• professionals’ fees
• rents, ground rents and service charges
• bank account fees
• repair and maintenance costs
• postage, stationary, signage

If you are letting a room in your home rather than letting out a full property or finished holiday let, you’ll need to apportion these expenses, deducting only the part that is used by your guests as you are only allowed to claim for expenses that are incurred wholly and exclusively for the property rental.

Water rates, gas, and electricity

These are pretty self explanatory. If you have someone else staying with you, or you are letting out a property to someone, you’re going to see an increase in all of these (provided they are metered). It’s only fair then that you claim back a portion of these as operational expenses.

An easy way to apportion these might be to look at your previous bills, take an average and then see what the percentage difference is over a month when you guests. Another method might be to divide the bill by the number of rooms, then multiply it by the amount of rooms the guest has sole access to.

Accounts and banking fees

While you can get by using your regular personal current account when renting a room in your home, opening a dedicated business account will make your life much easier. And those with a furnished holiday let will need a business bank account anyway.

Tide is a top choice here. The account is free and easy to setup. Zempler Bank is another good option. Both have some small transaction fees but the good news is that any fees are 100% deductible for tax purposes.

Whether renting out a room in your home, or running a FHL, your day to day account is likely to be extremely basic. That being said, you might want to employ the services of an account to handle the accounting and tax returns for you, and to ensure you’re making the mosts of the various allowances available to you. Again, these fees will be classed as a business expense and so will be deducted from any revenues before tax.

If you decide you don’t want to spend the money on an accountant, then something like FreeAgent can be a great way to keep track of all your business income and expenditure, and allows you to automatically file your end of year tax return direct the software.

Airbnb fees

Airbnb fees are necessary evil, but as they are a cost of doing business, they are considered tax deductible and can safely be deducted from your profits for tax purposes. In some cases this deduction might make it worthwhile swallowing more of fees yourself, rather than passing them on to your guests, thus making your listing more attractive.

Insurance

Insurance policies that cover your rental and the damage guests might cause are an allowable expense, but things like buildings insurance won’t be allowable for those who are only letting a room in the home they are living in.

Permits and licences

The rules around airbnbs differ around the the UK. For example in London you can only let your property on Airbnb for a maximum of 90 days unless you have special permission. In Glasgow you may need a permit, and in Northern Ireland you need a certificate from the tourism board. The cost of meeting these requirements and obtaining the permits is an allowable expense.

Professional’s fees

Most professional’s fees can be deducted too, provided they are solely related to your Airbnb business. For example, hiring a photographer to take high quality photos for your listing would be considered solely business use. Yet, hiring a gardener to take care of the front and/or rear gardens of a home that you are living would not.

Repair, maintenance, and replacement costs

Now this where things get tricky and again what you can claim depends on whether you are running a furnished holiday let, or renting a room in your home.

Renting a room in your home:

You can claim for repairs on equipment used by guests. A repair is classed as restoring the item to its original condition. In some cases this may mean buying new parts for it. For example, installing new doors on a damaged wardrobe. Replacing minor items such cushions, bedding etc.. is also allowable, as are costs for decorating provided they are exclusively incurred due to the rental.

You cannot however claim for the replacement of domestic items, e.g. a new bed, or wardrobe etc…

Furnished holiday lets:

If you are running a furnished holiday let, then you can claim allowable expenses on most repairs and maintenance costs, as well as claiming capital allowance on replacing domestic items such as fridges, freezers, TVs, floor coverings, furniture etc…

When claiming capital allowance relief for replacing domestic items, you can typically only claim like for like. For example if you need to replace a 42″ TV, but you instead buy a feature rich 52″ TV. That may be classed as an improvement on the old asset. As such, you can only claim the difference in cost between the items. So the a new 42″ TV cost £400 but the replacement 60″ screen was £1,000, you would only claim £400 under the capital allowance scheme.

There is some leeway here though when the replacement item although an improvement is considered to be a reasonable modern equivalent. For example, replacing an old fridge freezer with a new more expensive energy efficient device.

More on allowable expenses

The costs above are just some of the typical expenses Airbnb hosts might face when letting a room or property. It isn’t an exhaustive list of what can be claimed, but an example to get you thinking about your expenditure. The Gov.uk website goes into further detail on allowable expensive, and we’d suggest you double check there. If you’re still in doubt seek advice from a qualified accountant.

Thinking for switching from renting a room in your home to letting out the whole property? Don’t miss our guide on changing a mortgage to buy to let.