Tax systems can be a friend or foe to entrepreneurs. So it’s wise to always keep one highly aware and leery eye gazing in the direction of the tax man when you own a business. For example, a recent change in regulations for those utilizing the rent a room system could have repercussions for those utilizing platforms like Airbnb. In 1992 the British government wanted a way to stretch housing potential to cover a dearth of vacancies. To that end, they landed on the idea of incentivizing individual homeowners to rent out space in their homes. Owners could earn almost 8000 pounds annually, tax-free. Unfortunately, the sweet deal is now set for a slight pickling process, but only for those expanding the original premise to rent out an entire property. Treasury officials have decided that those that use the original tax-free offering to make a side income from renting out a spare bedroom are not subject to more taxation. However, those that commit to renting out larger sections for longer periods of time are in effect moving towards a path normally reserved for commercial landlords and will be subject accordingly.
Key Takeaways:
- Modifications to the Rent A Room program may lead to higher taxes for property owners that let via Airbnb.
- Tax breaks will only be given to property owners who let a portion of their property.
- The government seems to be reducing tax breaks to property owners that let extra rooms.
“However, in its response to a consultation document on the Rent A Room system it appears the government is to offer the tax relief only if part of a property is let – not the entire property, as is often the case in modern internet-booked short lets.”
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