Airbnb Hosts Faces Tax Increase Of £400 To £3,300

The British Government seeks to do away with rent-a-room tax relief for short-term lettings by Airbnb hosts and may increase the tax rates starting from £400 going to £3,300 in a year. The proposed policy will have rent owners shaken as they typically earn only about £2,000 in a year.

A paragraph was stated in the government's budget for 2017 that the rent-a-room tax relief would be scrapped for Airbnb users and officials "will consult on proposals" to "align the relief more closely with its intended purpose, to increase supply of affordable long-term lodgings."

Generally, hosts will be taxed for their profits, while users are entitled to a £7,500 tax-perk if they rent out regular rooms. If that perk is stopped, Airbnb hosts can be seen paying a tax of £800 based solely on the £2,000 earnings according to The Telegraph.

Basic Airbnb hosts and users will get to pay the lowest of £400 while high-tax-paying owners might shell out £1,540 to £3,375 a year. Currently, there are about 25,000 homeowners who listed their spaces in Airbnb to which short-term lettings have been quite popular.

Tourists prefer to stay in Airbnb's lodging services because it's much cheaper as they benefit from a lot of tax reliefs. Hotels have often accused the government of letting these lodges have tax breaks while larger accommodating establishments get to pay higher tax rates and VAT fees on top of the bill.

Airbnb has been widely criticized for hurting hotel businesses with the latter shelling out more expenses just to survive the industry. Moreover, Hospitality Net reports that more than 2,800 jobs in hotel management were lost to Airbnb, and a cost of over $200 million was in deficit for hotel employees.

Meanwhile, industry experts suggest that Airbnb homeowners can still reduce their taxes by saving receipts and deduct reasonable expenses like utilities and mortgages. Replacement relief from the Wear and Tear Allowance policy can also help homeowners lessen the burden of paying higher taxes by claiming the £1,000 benefit by selling old items and replacing them with something new. Replacement relief works with furniture, furnishings and kitchen appliances.