You may have read that Airbnb have made a deal with HMRC that potentially leaves thousands of UK users with large tax bills and no doubt additional heavy penalties.
Airbnb settled their own tax dispute with HMRC, whilst agreeing to share the data of over 200,000 people who use the app, along with the income they received in the years 17/18 and 18/19 for the rental of second homes or spare bedrooms.
We have found a common misconception by many people with rental income, that if the income only just (or doesn’t quite) cover the cost of the mortgage, then there is no need to complete a tax return.
However, it is only the interest element (not the capital) of the mortgage that is classed as a deduction from income and in some cases (higher rate taxpayers) not all of this interest is allowable.
Going forward, HMRC is in the process of compiling information about individuals generating income via the ‘gig’ economy or selling on popular websites such as eBay or Etsy, we will keep a keen eye on these developments.
If you are unsure whether you need to declare a tax return or of the tax reliefs that are available, contact an experienced advisor to help……note that a failure to disclose taxable income could lead to additional penalties of up to 100% of the tax due, where as if a voluntary disclosure to HMRC made, it is considered favourable…….or in other words, it will cost you far less if you “fess up before you are found out”………and we certainly don’t like to see anybody overpaying HMRC unnecessarily