Airbnb & Digital Platform Income: The Complete 2025 UK Tax Guide for Hosts
Introduction: Why This Matters Now
The world of Airbnb hosts, Booking.com landlords, Etsy sellers, Uber drivers, and Deliveroo partners has undergone a dramatic transformation over the last decade. What once felt like casual “side income” is now firmly on HMRC’s radar.
With the introduction of DAC7 reporting rules, digital platforms now automatically send your earnings to HMRC. That means the old assumption of “staying under the radar” no longer works. Penalties can reach up to 100% of undeclared tax, and the compliance net is tightening every year.
At CIGMA Accounting, we specialise in guiding landlords, Airbnb hosts, and digital entrepreneurs across Wimbledon, Farringdon, Sutton, Canary Wharf, Chelsea and across London, turning tax stress into tax clarity. This long-form guide explains everything you need to know about Airbnb and digital platform income in the UK for 2025.
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How Airbnb and Digital Platform Income is Taxed
Airbnb and digital platform income falls under UK tax legislation just like any other income. The difference is that many individuals earn this income casually, perhaps letting a spare room for a few weekends, listing a property while travelling, or selling items occasionally online. That casual perception often leads to misunderstandings and underreporting. Here are the thresholds and their meanings for you.
Income thresholds you need to know
Trading allowance – The first £1,000 of income from platforms like Airbnb, Booking.com, or Etsy may be completely tax-free. This allowance is designed to cover very small-scale or occasional trading. However, once you cross this threshold, all additional income must be declared.
Rent-a-Room relief – If you let out a furnished room in your main home, you can earn up to £7,500 per year tax-free. This is separate from the trading allowance and applies to live-in hosts. For couples jointly letting a property, the threshold is halved (£3,750 each).
Above thresholds – Anything above these allowances requires you to file a Self-Assessment tax return. Even modest profits must be declared once the thresholds are passed.
Why professional advice matters
If you are unsure which category you fall under, a professional review can prevent costly mistakes. For example, many hosts confuse Rent-a-Room relief with rental allowances for buy-to-let landlords. Others misapply mortgage interest deductions, claiming them incorrectly. Even minor omissions can trigger an HMRC nudge letter if your platform data doesn’t match your tax return.
Another common misconception is that Airbnb income earned overseas (e.g., if you rent out a holiday property in Spain or Portugal) does not need to be declared in the UK. In reality, UK tax residents are required to declare their worldwide income, although relief may be available through double tax treaties.
Compliance in practice
At CIGMA, we help clients determine whether their digital platform income qualifies for allowances, how to file correctly, and how to avoid overpaying tax. By carefully structuring your income and using reliefs legitimately, you can often reduce your tax bill significantly while staying fully compliant with HMRC requirements.
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DAC7 Reporting – Why “Keeping Quiet” No Longer Works
As of January 2024, the OECD DAC7 rules became effective, fundamentally changing the way digital platform income is monitored. Platforms like Airbnb, Booking.com, Etsy, and Uber are now legally obliged to share their users’ financial data directly with HMRC and other tax authorities in participating countries.
What DAC7 means for hosts
Complete transparency – Every booking, payout, and platform fee is now visible to HMRC. This includes gross revenues, deductions for platform commissions, and even the timing of payments.
Cross-border income – Hosting an Airbnb in Spain, Portugal, Dubai, or any other jurisdiction is no longer hidden from UK authorities. DAC7 facilitates data-sharing across borders, ensuring HMRC has access to income earned abroad.
Increased penalties – If HMRC discovers undeclared income through DAC7, penalties for non-disclosure will be harsher than if you voluntarily disclose. Interest on unpaid tax will also accrue, adding to your liability.
The risk of “wait and see”
In the past, some hosts believed they could stay under the radar if their income were modest or occasional. That assumption no longer holds. With platforms reporting income automatically, HMRC already has the information — they are simply waiting to see whether you declare it. If you don’t, you’re immediately at higher risk.
Case Study – Chelsea Airbnb Host
A landlord running an Airbnb in Chelsea received a DAC7-triggered HMRC letter. With CIGMA’s support, they disclosed income under the Let Property Campaign. Because the disclosure was voluntary and complete, HMRC agreed to reduce penalties to zero. The client only paid the tax owed plus interest, avoiding a far more expensive outcome.
This case illustrates the value of early, proactive action. Ignoring HMRC letters or hoping DAC7 data won’t be matched is a costly gamble.
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Allowable Expenses – Don’t Overpay Tax
One of the biggest mistakes Airbnb hosts and digital sellers make is failing to claim legitimate business expenses. Every pound you can deduct as an expense reduces your taxable profit, directly lowering your tax bill. HMRC allows a wide range of deductions for digital platform income; however, the key is to claim them correctly and maintain adequate records.
Common deductible expenses
Cleaning and laundry – Essential for Airbnb lets. Professional cleaning or laundry services can be deducted. Even DIY cleaning may be partially deductible if you can show the supply costs.
Repairs and maintenance – Necessary upkeep (e.g., fixing a boiler, replacing furniture) is deductible, but capital improvements (e.g., adding an extension) are not.
Utilities, council tax, and insurance – Proportional claims can be made for electricity, gas, water, and council tax if the property is available for short-term lets. Insurance specific to letting is fully deductible.
Platform fees and commissions – Airbnb and Booking.com service fees reduce your taxable profit and should always be claimed.
Mortgage interest – For individuals, relief is restricted to a 20% basic-rate credit. Companies, however, can still deduct full mortgage interest, which is why incorporation is sometimes recommended.
Case Study – Sutton Etsy Seller
A small Etsy seller was failing to claim packaging, postage, and e-commerce software subscription costs. After CIGMA’s review, taxable profits were reduced by 30%, freeing up cash flow for business growth and reducing HMRC liabilities.
Why bookkeeping matters
Many hosts neglect proper bookkeeping, leading to overpaid tax. By maintaining accurate, real-time records, you can capture all deductible costs and avoid disputes with HMRC. At CIGMA, we help clients implement simple systems that track expenses automatically, reducing admin and ensuring nothing is missed.
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Voluntary Disclosure – How to Fix Past Mistakes
Not everyone gets it right the first time. If you’ve failed to declare Airbnb or digital platform income in previous years, HMRC offers formal disclosure routes that can help minimise penalties — provided you act before they catch you.
Disclosure options
Digital Disclosure Service (DDS) – Designed for individuals with self-employment or platform income omissions. This route lets you come forward voluntarily, calculate the tax owed, and agree on a repayment schedule with HMRC.
Let Property Campaign (LPC) – Specifically for landlords who failed to disclose rental income. This applies whether you’re letting via Airbnb, Booking.com, or traditional rental agreements.
Why act early?
By coming forward voluntarily, penalties can be reduced by up to 100%. In practice, this often means paying only the tax owed, along with a small amount of interest. If you wait for HMRC to contact you, the penalties are far harsher and the negotiation less flexible.
At CIGMA, we have successfully guided numerous clients through the disclosure process, often securing outcomes where penalties were reduced to zero. Our expertise lies in presenting cases clearly and demonstrating cooperation, which HMRC views favourably.
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VAT & Airbnb – The Hidden Trap
VAT is one of the most overlooked aspects of running an Airbnb or serviced accommodation business. While many hosts assume VAT doesn’t apply to them, once your taxable turnover exceeds £90,000 (2025 threshold), registration is compulsory.
What VAT means for Airbnb hosts
Standard VAT rules – Serviced accommodation is treated like a hotel business. This means standard-rate VAT (20%) applies to guest charges, not just your commission earnings.
Flat-rate scheme – Some hosts attempt to simplify VAT by using flat-rate schemes. However, for many, this results in paying more VAT than necessary, especially if significant expenses are incurred.
Common traps – Forgetting to include overseas Airbnb income in VAT calculations, or misunderstanding that the threshold applies to gross turnover, not profit.
How CIGMA helps
We run full VAT impact reviews for Airbnb and property businesses. In many cases, we identify opportunities to recover VAT on costs, restructure income through companies, or implement systems to maintain straightforward compliance. By taking VAT seriously, you avoid penalties and improve profitability.
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The Future – Property & Consumption Taxes
Tax landscapes evolve with economic priorities. Governments are increasingly focusing on taxing assets and consumption rather than just income. For Airbnb hosts and property owners, this means preparing for a shifting regulatory environment.
Expected changes
Higher council tax bands – Local authorities are under pressure to raise revenue, and properties let on platforms like Airbnb may face reclassification into higher tax bands.
Property wealth tax – Although not yet in force, policymakers continue to discuss new property wealth levies, particularly for high-value areas such as London and the South East.
Digital VAT expansion – Subscription services, online platforms, and gig-economy earnings may fall under broader VAT obligations.
Carbon levies – Environmental policy may see higher charges on travel-related lettings, targeting frequent Airbnb activity.
Case Study – Canary Wharf Consultant
A consultant with rental income in both the UK and the UAE faced the risk of double taxation. With CIGMA’s guidance, they applied for Double Tax Treaty relief. The result was a £30,000 tax saving, demonstrating how international planning protects income.
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Ready to get proactive with your finances? Speak to Cigma Accounting today for expert, local support—whether you need Accountants Wimbledon and Accountants Farringdon. We’ll streamline your books with our Bookkeeping services London, guide you through the latest rules in our MTD for Income Tax 2025–26 guide, and help creators stay compliant with our Content creators & influencers tax guide.
Planning for the future? Explore our forward-looking insights in AI vs Tax Advisor London 2025, and safeguard your business with practical advice on Common triggers for HMRC investigations. Whatever your goal—growth, compliance, or cash-flow clarity—Cigma Accounting is here to help. Get in touch now for a no-obligation chat and discover how our approachable specialists can simplify the complex while keeping you fully compliant.
Require accounting services?
Get in touch with our expert accountants today! Contact us via WhatsApp for personalized financial solutions.
FAQ's
Not if your total gross platform income stays under the trading allowance. However, remember that £1,000 is the total across all digital platforms, not per platform.
Rent-a-Room relief may cover up to £7,500 per year tax-free if you’re letting out part of your main home. This relief does not apply to entire property lets.
With DAC7 and CRS reporting in full effect, it is likely that HMRC will already know about your income. Non-disclosure can lead to penalties of up to 100% of the unpaid tax, plus interest.
Yes — Airbnb and rental profits are added to your other income. This could push you into a higher band or trigger the High Income Child Benefit Charge if your total income exceeds £50,000.
You cannot claim both the trading allowance and actual expenses for the same income stream. A careful choice of method ensures the best possible outcome.
Yes — recent BBC reports revealed that some hosts attempt to sidestep the 90-day limit by closing and reopening listings under new profiles. However, local councils are now tightening enforcement, and HMRC can cross-reference host data with platform reports under DAC7.
This means that even if a host changes their account, occupancy records and payment data remain traceable. The safest approach is to comply fully and manage bookings transparently through proper accounting records.
At CIGMA Accounting, we help London landlords and short-term rental operators stay compliant with both DAC7 and the 90-day regulations — while optimising tax efficiency.
- HMRC Compliance Investigations
- BBC: London Airbnb hosts breaking 90-day limit face crackdown
Need Assistance from an Accountant?
Running an Airbnb, Booking.com, or digital platform side-business? Don’t wait for HMRC to knock. At CIGMA Accounting, we’ve helped London landlords, digital nomads, and entrepreneurs cut penalties to zero and reclaim control over their tax position.
Managing your tax affairs in this new landscape is no longer optional. With DAC7 reporting, every booking and payout is already visible to HMRC. The only question is whether you declare it first or wait for a letter to arrive. Acting early gives you control, reduces stress, and can eliminate penalties entirely. Our role is to guide you through this process with clarity, precision, and a focus on protecting both your income and your reputation.
We provide tailored solutions for every type of host: whether you are a casual sharer renting a spare room, a professional landlord with multiple properties, or a digital entrepreneur diversifying through platforms like Etsy or Uber. Our services range from day-to-day bookkeeping to international tax planning, voluntary disclosures, VAT reviews, and year-end accounts. We don’t just process numbers; we design strategies that give you peace of mind and allow you to focus on growing your business.
Many of our clients came to us after receiving HMRC letters, feeling anxious and overwhelmed. Through structured disclosure and careful negotiation, we have consistently achieved outcomes where penalties were reduced to zero or close to it. Others approached us proactively and have enjoyed years of smooth compliance and predictable cash flow. Whatever your starting point, you can benefit from our experience across London’s property and digital sectors.
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