VAT on Airbnb & Holiday Lets

If you’re running an Airbnb, a serviced apartment, a holiday cottage, or even renting out part of your home, VAT can feel confusing. Many hosts don’t realise they might accidentally cross the VAT threshold — or that different types of short-term letting can lead to completely different VAT outcomes.

This guide breaks the 2025 rules into simple steps so you can understand exactly where you stand.

Why VAT on Airbnb is such a hot topic
HMRC has become much more active in the short-term rental sector. The main reasons:

• Rapid growth of Airbnb-style letting
• Hosts often treat it like “casual income”
• Many don’t realise short-term accommodation is a taxable supply
• HMRC has started issuing enquiry letters to hosts who exceed the threshold

Is Airbnb/holiday letting subject to VAT?
Yes — short-term holiday accommodation is always a standard-rated supply (20%) unless very specific exemptions apply.

This includes:

• Airbnb rooms
• Holiday cottages
• Serviced apartments
• Glamping pods / shepherd huts
• Short stays in private homes
• Holiday parks / chalets

If you operate like a hotel (cleaning, linen, check-ins, guest services), HMRC treats it as taxable business activity, not passive property income.

When do you need to register for VAT?
You must register if:

1. You exceed the VAT threshold (£90,000 rolling 12 months)

The threshold applies to total taxable turnover from:

• Airbnb
• Direct bookings
• Other UK holiday lets (if you have more than one)

It’s not a calendar year and not your last financial year — it’s a rolling 12-month total.

2. You expect to go over the threshold in the next 30 days

For example, if you sign a contract with a holiday letting agent guaranteeing a certain amount.

Even if your business is “small”, VAT registration is still required if you pass the threshold.

Who actually charges the VAT — you or Airbnb?
This is where hosts can get confused.

Airbnb is not the supplier of the accommodation. You are.

Airbnb simply charges a service fee.
You are responsible for:

• Charging VAT (if registered)
• Issuing VAT invoices (if asked)
• Including all income in your VAT return

What about “deemed supplier” rules?
Currently, the UK has not applied a marketplace “deemed supplier” rule to accommodation.
So Airbnb does not add VAT on your behalf.

What if you let part of your own home?
The rules are the same.
If you run Airbnb from your main residence and it exceeds the VAT threshold, you must register for VAT on the whole Airbnb activity.

This surprises many hosts.

Rent-a-Room relief does NOT change the VAT treatment.

Can you split the business to avoid VAT?
HMRC is very clear:

You cannot artificially split an Airbnb business to stay under the VAT threshold.

Common examples that don’t work:

• Putting different properties in your own name and your partner’s name
• Creating multiple small companies that all operate the same letting business
• Running summer bookings separately from winter bookings

If they’re run as one business, HMRC will combine them.

What if you run a portfolio of holiday lets?
All UK short-term accommodation income must be aggregated for VAT threshold purposes.

Example:

• Cottage 1: £45,000
• Cottage 2: £32,000
• Airbnb flat: £18,000

Total = £95,000 → VAT registration required

 VAT benefits of registration
Although registering for VAT may seem negative, there are significant upsides:

1.  You can reclaim VAT on renovation & refurbishment

Holiday lets often involve:

• New kitchens/bathrooms
• Structural works
• Furnishings
• Tradespeople
• Cleaning services
• Management fees

These are usually VAT-bearing costs → reclaimable if you’re VAT registered.

2. You can use the Flat Rate Scheme

Some hosts save money using the Flat Rate Scheme (FRS) where you charge 20% VAT but only pay HMRC around 10.5%.

Works best if:

• Your costs are low
• You want simpler recordkeeping
• Your accommodation is small/seasonal

When VAT does not apply
These are valid VAT exemptions/special cases:

1. Long-term residential letting (over 28 days)

If you let a property long-term:

• The supply becomes VAT exempt
• Exempt turnover does not count towards the threshold
• You cannot reclaim VAT on related costs

2. Renting out a property with no services

If it’s just “bare letting” with no short-stay services, VAT usually doesn’t apply.

Example scenarios
Scenario A — Small Airbnb host

Income: £12,000
→ No VAT registration needed
→ VAT doesn’t apply

Scenario B — Busy city apartment

Income: £48,000
→ Still below threshold
→ But must monitor rolling 12-month total

Scenario C — Two cottages

Combined income: £94,000
→ Must register
→ Must add VAT to prices
→ Can reclaim VAT on renovation costs

Scenario D — Hosts switching to long stays

Switching to stays over 28 days:
→ VAT becomes exempt
→ Might lose ability to reclaim VAT on costs
→ Might be better to remain short-stay depending on profitability

Need Help Reviewing Your VAT Position?
As VAT experts, we can help businesses assess whether they need to register for VAT, even if below threshold there can sometimes be benefits in voluntary registration.