The landscape of the rental property market has undergone significant changes in recent years, with an increasing number of landlords opting for short-term rentals, particularly through platforms like Airbnb. One significant motivation behind this shift is the potential tax advantages it offers. In the United Kingdom, landlords are finding ways to maximize their returns while minimizing their tax liabilities. This blog explores the trend of landlords switching to short-term rentals, specifically Airbnb, in order to save on taxes in the UK.

Understanding the Appeal of Short-Term Rentals

Short-term rentals have gained immense popularity due to several factors, including the rise of the sharing economy, increased travel and tourism, and the desire for unique and personalized accommodation experiences. Platforms like Airbnb have made it easier than ever for property owners to monetize their real estate assets on a short-term basis. While traditional long-term rentals have their advantages, short-term rentals present unique opportunities for landlords to generate higher rental income.

Tax Advantages for Landlords

  1. Rent-a-Room Scheme: The Rent-a-Room scheme is an initiative introduced by the UK government that allows homeowners to earn up to £7,500 per year tax-free by renting out a furnished room or entire home. This scheme is particularly attractive for landlords utilizing platforms like Airbnb, as it enables them to generate additional income without incurring tax on the first £7,500.


  1. Furnished Holiday Lettings (FHL): Landlords who meet certain criteria and rent out properties on a short-term basis, qualifying as FHL, can benefit from various tax advantages. These include the ability to claim capital allowances, offsetting mortgage interest against profits, and utilizing more favourable tax treatment for capital gains tax.


  1. Expenses and Deductions: Short-term rental landlords can deduct a range of allowable expenses associated with managing their properties. These expenses may include mortgage interest, repairs and maintenance, cleaning fees, insurance, utility bills, and advertising costs. By accurately tracking and documenting these expenses, landlords can reduce their taxable rental income.


  1. Capital Gains Tax Relief: Depending on the specific circumstances, landlords may be eligible for certain capital gains tax reliefs when selling a property that has been used as a short-term rental. For example, entrepreneurs’ relief or rollover relief may be available in certain situations, helping to mitigate the tax liability on the capital gain.


Important Considerations


  1. Regulatory Compliance: Engaging in short-term rentals, particularly on platforms like Airbnb, requires landlords to comply with various legal and regulatory requirements. It is essential to understand local laws, obtain any necessary permissions or licenses, and adhere to safety standards and local planning regulations.


  1. Changing Regulations: The regulatory environment surrounding short-term rentals is constantly evolving. It is crucial for landlords to stay informed about any changes in regulations and taxation policies that may affect their short-term rental activities. Regularly reviewing and adjusting strategies in response to these changes is essential to ensure compliance and maximize tax advantages.


  1. Management and Operational Challenges: Managing short-term rentals can be more demanding compared to long-term rentals. It requires effective marketing, guest screening, property maintenance, and responsive customer service. Landlords must consider the time, effort, and cost involved in managing the property or engage professional property management services.



The increasing popularity of short-term rentals, particularly through platforms like Airbnb, has attracted landlords seeking to benefit from the tax advantages available in the UK. By leveraging schemes like Rent-a-Room and qualifying as Furnished Holiday Lettings, landlords can reduce their tax liabilities and maximize their rental income. However, it is crucial to navigate the legal and regulatory landscape, stay informed about changing regulations, and effectively manage the operational aspects of short-term rentals. As with any investment decision

Please contact Tanya on 0161 850 9911 if you are a landlord, or are thinking of becoming a landlord, and you would like to discuss the most recent regulations.