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Booking.com in UK: Property Tax Insights and Guidance

Published by Prasun Shrestha
Posted Date: October 31, 2023 , Modified Date: May 21, 2024

In the era of digital innovation, platforms like Booking.com have revolutionised the way property owners across the United Kingdom manage their rental accommodations.

As specialists in UK property accountancy and taxation, we're here to guide property owners through the intricacies of utilising Booking.com, shedding light on income tax, VAT, capital gains tax, and other pertinent aspects.

Income Tax Considerations

Listing your property on Booking.com in UK means entering the world of property rentals, where income tax implications come into play:

Rental Income

The income generated through Booking.com listings is subject to income tax. You must maintain comprehensive records of your earnings and related expenses for income tax purposes.

Allowable Expenses

Property owners have the opportunity to deduct allowable expenses, such as property maintenance costs, mortgage interest, and cleaning fees, to reduce their overall tax liability.

Value Added Tax (VAT)

Understanding VAT is paramount for hosts using Booking.com in the UK:

  • VAT Registration: When your earnings from Booking.com exceed the VAT threshold, you are required to Register for VAT. Nevertheless, it's worth noting that rental income from residential properties frequently qualifies for VAT exemption.
  • VAT on Service Fees: Be mindful that VAT applies to Booking.com's service fees, potentially impacting your profitability.
  • TOMS applicability: Considering the recent Sonder case, the Tour Operators Margin Scheme (TOMS) Scheme might be applicable to a property listed on Booking.com if specific criteria are met.

Capital Gains Tax (CGT)

Capital gains tax pertains to the tax imposed on the profit earned from the sale of an asset that has appreciated in value. In the United Kingdom, capital gains tax is levied when selling second homes and properties purchased for Buy-to-Let purposes.

  • Private Residence Relief: Property owners who used their property as their primary residence may be eligible for Capital Gains Tax (CGT) relief when selling.
  • Letting Relief: Letting Relief is accessible when an individual's main residence includes a part of a dwelling house, and another part of the house is rented out as residential accommodation. Since the tenant holds exclusive rights to that portion of the property, Private Residence Relief is not applicable to that segment, but letting relief is applicable.

Stamp Duty Land Tax (SDLT)

Stamp Duty Land Tax (SDLT) is a self-assessed tax that must be paid when a property is acquired or transferred.

If a property is acquired with the intention of using it for Short-Term Property Rental, an increased SDLT rate may apply.

The additional SDLT surcharge is applicable above standard SDLT rates for additional properties purchased for Buy-to-let.

Local Regulations and Variations

The impact of Booking.com varies across the UK, with specific regulations in some regions:

Rental income from Booking.com may vary as per the Local Authority Rules in different regions. In major cities like London, unique rules may apply to short-term property rentals. It's crucial to acquaint yourself with local regulations.

The Advantages of Booking.com

Booking.com offers a host of advantages for property owners:

  • Increased Access to Property: Expand your rental income by accessing a global pool of travellers.
  • Flexibility: Maintain control over when your property is available for check-ins and check-outs, accommodating your personal schedule.
  • Benefit of Furnished Holiday Lettings (FHL): If your listing on booking.com qualifies as Furnished Holiday Lettings (FHL), you can enjoy a range of tax advantages, including exemption from interest relief limitations, eligibility for Capital Gains Relief, and the opportunity to claim Capital Allowances, among other benefits.

General Compliance Rules for Booking.com

Staying compliant with Booking.com and tax authorities is of utmost importance:

1. Honest Listings

Ensure that your property listings are transparent and provide accurate information on Booking.com.

2. Effective Guest Communication

Property owners can maintain clear communications with their guests by placing instructions in the Booking.com platform, such as for check-in and check-out requirements, facilities available, etc.

3. Partner Liability Insurance

Familiarise yourself with Booking.com's Partner Liability Insurance, which protects against damages caused by guests or claims made by guests concerning accidents that occurred during their stay. It's a valuable resource in case of unforeseen incidents.

4. Host Fees

Be aware of the host fees charged by Booking.com for using their platform. Understanding these fees is essential for accurate financial planning.

5. Reviews

Encourage your guests to leave reviews after their stay, as positive reviews can significantly boost your property's reputation on Booking.com.

6. Amenities

Make your property stand out by providing a range of amenities that cater to your guests' needs, such as complimentary toiletries, high-speed Wi-Fi, and well-equipped kitchens.

Exploring Booking.com Property Types

Booking.com presents an array of property types to cater to diverse traveller preferences:

Apartments and Homes: Offer entire properties to travellers seeking a home away from home.

Hotels and Resorts: List hotel rooms and resort accommodations for tourists and business travellers.

Unique Stays: Showcase distinctive properties, such as boutique lodges or serene countryside retreats.

Tax-Saving Tips for Your Booking.com Lettings

Rent a Room Scheme

The Rent a Room Scheme is a relief HMRC provides for the owner, tenants, and occupiers to earn a tax-free income within the limit the HMRC prescribes. 

The annual Rent-a-Room limit is prescribed to be £7,500 per annum. You can opt for the scheme if the following conditions are met:

  • The room is furnished.
  • The accommodation is part of your main home when you let it.

However, one cannot use the scheme if the accommodation is:

  • Used as an office or for any business by the lodger.
  • The accommodation is the UK home for the owner and is let while the owner lives abroad.

Note:

  • Even if a landlord takes in multiple tenants, he can only deduct the allowance of £7,500. The scheme applies per property and not per tenant.
  • The deduction of £7,500 reduces to £3,750 if someone else jointly owns the property which is being let out.
  • If the property owners opt to choose the scheme, then you are not allowed to claim any other expenses incurred for generating the rental income, i.e., tax is payable on total receipts less £7,500. As such, if your gross rental receipts are below £7,500 in a tax year, tax exemption is automatically applied, and you are not required to declare your income in your tax return.

Property Allowance

The property allowance is a tax relief that allows landlords to earn up to £1,000 tax-free from their rental income.

If you’re a landlord with gross rental receipts not exceeding £1,000 per year, the income is not charged to tax.

Note: 

  • You must elect to apply for property allowance on or before the first anniversary of 31 January following the tax year.
  • You cannot claim a deduction for expenses if you claim the property allowance.
  • If the property is jointly owned, the share of gross rental receipts of each joint owner is considered.

The Prospects of Booking.com in the UK

Booking.com's outlook in the UK looks promising, thanks to its adaptability in the face of evolving travel patterns. Staying well-informed about possible alterations in regulations and market shifts is imperative for property owners.

As specialists in UK Property Accountancy and Taxation, we're ready to support you in navigating the intricacies of Booking.com. Whether you're a seasoned host or contemplating entry into the platform, grasping the financial nuances is fundamental to your prosperity.

For tailored guidance and to guarantee adherence to tax regulations, don't hesitate to get in touch with us.

Maximise your income while minimising tax stress. Let us navigate the Booking.com's tax complexities for you.

Contact us today for efficient and hassle-free assistance.

Prasun Shrestha
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