Government consults on closing Rent-a-Room loophole for Airbnb hosts

As the number of Airbnb properties nearly triples, government says tax-free income scheme needs "re-designing".

All eyes on are on Philip Hammond as he battles to save his National Insurance Contributions tax increases for the self-employed following a back-bench revolt on the measures, which were announced in Wednesdays Spring Budget.

Airbnb logoBut while the political football continues today, a measure designed to stop the rise of Airbnb has been slipped through in the detail of his recent budget statement.

The government is to consult on proposals to reformulate the Rent-a-Room relief. It’s a measure introduced in 2014 that enables home owners to earn up to £7,500 a year tax-free from letting out furnished accommodation within their home. This was increased recently from £4,250.

Airbnb hosts have taken advantage of this loophole which now makes using Airbnb doubly attractive, and has persuaded many landlords to rent their homes out via the website, rather than using traditional letting agents.

Research for The Negotiator by consultancy Airdna reveals that, in London, the number of properties listed to rent out via Airbnb has risen from 22,945 in January 2015 to over 60,214 today, an increase of 162%.

Airdna also says Airbnb properties have an average occupancy rate of 60% and that average revenues for Airbnb hosts in London are all under the Rent-a-Room threshold.

For example, the average rent for a two-bedroom flat in London offered via Airbnb has increased over the past two years by 23% from £3,445 to £4,248, way ahead of the traditional longer-term let market.

The government says its proposals to redesign the Rent-a-Room tax-free income system will “align the relief more closely with its intended purpose to increase supply of affordable long-term lodgings.”


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