HMRC launches tax clampdown on Airbnb and short lets landlords

HM Revenue and Customs has opened almost 2,000 investigations into landlords letting out via Airbnb or other short let platforms.

The Daily Telegraph, which submitted a Freedom of Information request to the tax authority, says the 2,000 enquiries opened in 2023-24 are some five fold the number the previous year - 2022-23 - and 20 times the 95 in 2021-22. 

HMRC says it is chasing holiday lets homeowners who are failing to declare income from rent.

An HMRC spokesman told the Telegraph: “The short-term property rental market is growing fast and it’s our role to ensure owners pay the right tax, creating a level playing field for all.

“We have dedicated specific resource to opening enquiries where there is evidence that those renting out holiday lets have not declared income.”

Chancellor Jeremy Hunt’s Budget in March abolished the Furnished Holiday Lettings tax regime which gives extra tax reliefs for costs incurred furnishing holiday lets that aren’t available to private rentals. 

This was done - so the government claims - to remove the incentive for landlords to offer short-term holiday lets rather than longer-term homes. 

This will take effect from April 2025 and Elizabeth Small, a tax partner at law firm Forsters, comments: “Selling your portfolio of furnished holiday lets be prepared for a price chip from the buyer, because from April 2025, if you let properties that would currently now qualify as FHLs, you will no longer be able to claim Capital Gains Tax reliefs for traders, you will not be entitled to plant and machinery capital allowances for items such as furniture, equipment and fixtures and the profits will not count as earnings for pension purposes.

“This means that the buyer is likely to want to pay less for a FHL portfolio as his post tax return will be diminished. But there is some good news for the sellers of holiday homes - as well as other additional property - because the higher rate of capital gains tax on residential property gains falls from 28 to 24 per cent. The lower rate will remain at 18 per cent, but remember the CGT annual allowance is also reducing.

“Whether these changes are sufficient to encourage FHL owners to exit the short term letting sector and either sell to home owners or to move to long term letting is yet to be seen, but it could end up with owners simply not bothering to rent out and using the property for a couple of weeks a year, meaning pubs, restaurants and shops in holiday hotspots having fewer visitors.”

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