Airbnb and Short-Term Let Income: How UK Landlords Pay Tax in 2026/27

The Furnished Holiday Lettings regime was abolished from April 2025. In 2026/27, Airbnb and short-term let income is taxed as standard residential property income. This guide explains what changes, how Section 24 now applies for the first time to former FHL landlords, and how Airbnb reports your income directly to HMRC.

If you let a property through Airbnb, Booking.com, Vrbo, or any other short-term platform in the UK, the tax rules changed materially in April 2025 — and 2026/27 is the first full year in which those changes are embedded across all income calculations, expense claims, and CGT positions.

The Furnished Holiday Lettings (FHL) regime, which gave short-term landlords access to Business Asset Disposal Relief, pension contribution relief, and capital allowances on furnishings, was abolished with effect from 6 April 2025. From that date, income from short-term lets is taxed in the same way as income from standard long-term residential lettings. There are no transitional provisions. For many London landlords with Airbnb properties, this produces a materially higher tax bill in 2026/27 than in 2024/25.

What Was the Furnished Holiday Lettings Regime?

Before April 2025, a property qualified as a Furnished Holiday Let if it was available for letting for at least 210 days per year and actually let for at least 105 days per year, without any single occupant staying more than 31 consecutive days.

Properties meeting these conditions were treated as a trading business rather than an investment property. The main advantages — all now removed — were:

FHL Advantage	Available Under Old Rules?	Available From April 2025?
Capital allowances on furniture and equipment	Yes	No — Replacement Domestic Items Relief only
Business Asset Disposal Relief on sale	Yes (18% from Apr 2026)	No — standard CGT rates apply
Pension contribution relief (FHL as relevant earnings)	Yes	No — FHL income no longer qualifies
Sideways loss relief against other income	In some cases	No
Section 24 mortgage interest restriction	Exempt	Now applies — same as all residential landlords

How Short-Term Let Income Is Taxed in 2026/27

From 2025/26 onwards, income from Airbnb, Booking.com, Vrbo, and direct short-term bookings is treated as property income under the same rules that apply to long-term residential landlords. You are taxed on rental income minus allowable expenses. Allowable expenses include:

• Mortgage interest (subject to the Section 24 restriction — see below)
• Letting agent or platform fees (Airbnb’s host service fee, for example)
• Cleaning costs and laundry between lets
• Insurance — building, contents, and public liability
• Utilities, council tax, and broadband you pay during void periods
• Repair and maintenance (not improvements)
• Professional fees — accountancy, legal advice
• Advertising and photography costs

Section 24 Mortgage Interest Restriction — New for Former FHL Landlords

This is the most significant financial change for leveraged short-term landlords. Under Section 24, mortgage interest is no longer deducted directly from rental income. Instead, you receive a 20% tax credit on mortgage interest costs.

For a higher rate taxpayer, this effectively doubles the cost of mortgage interest: you are taxed at 40% on the gross profit that includes the interest, but receive only 20% relief on the interest itself. FHL landlords were completely exempt from Section 24 — long-term landlords have been subject to it since 2017. Short-term landlords converted from FHL status in April 2025 face this restriction for the first time in their 2025/26 and 2026/27 returns.

Replacement Domestic Items Relief — Not Capital Allowances

Under the old FHL regime, you could claim capital allowances on the original purchase of furniture, beds, kitchen equipment, and other items — deducting the full cost in the year of purchase. Under the standard lettings regime, this is replaced by Replacement Domestic Items Relief: a deduction for the cost of replacing like-for-like items, but not for the original purchase of furnishings when the property was first let. If you bought all new furniture for your Airbnb property in 2024/25 under the FHL rules, that capital allowance claim was your last opportunity to use that route.

VAT on Short-Term Lets: The £90,000 Threshold

Short-term residential lettings under 28 days are standard-rated for VAT — they are not exempt supplies in the way that long-term residential lettings are. If your total Airbnb income across all properties exceeds £90,000 in any rolling 12-month period, you are required to register for VAT and charge VAT to guests.

This is a frequent surprise for London landlords with multiple properties. The £90,000 threshold is applied to total turnover across all your short-term letting activities — not per property. A landlord with three London flats earning £35,000 each per year has total Airbnb turnover of £105,000 and is above the VAT registration threshold. Once registered, VAT at 20% is added to nightly rates — which may affect your pricing competitiveness and requires quarterly VAT returns filed under Making Tax Digital for VAT.

Airbnb and HMRC: What the Platform Shares With the Tax Authority

From January 2024, digital platforms including Airbnb, Booking.com, eBay, Etsy, and Vrbo are required under DAC7 rules (adopted into UK law) to report seller income directly to HMRC. Airbnb reports the annual income of UK-based hosts automatically at the end of each calendar year.

This means HMRC already has your Airbnb earnings data. If you are not declaring this income on your Self Assessment tax return, you will receive a nudge letter — which can escalate into a formal HMRC tax investigation if the discrepancy is not addressed. There is no minimum threshold below which this reporting does not apply. HMRC receives the data whether you earned £500 or £50,000 through the platform.

The £1,000 Property Income Allowance

If your total property income — including short-term lets — is £1,000 or less per year, you can claim the property income allowance and pay no tax on it. For anyone earning more, the allowance can be used in place of claiming actual expenses — you deduct £1,000 from gross income instead of calculating specific costs. This is only worthwhile if your actual allowable expenses are below £1,000, which is unlikely for most active short-term landlords with cleaning, platform fees, and insurance costs.

Rent a Room Relief for Owner-Occupiers

If you let a furnished room in your own home — including through Airbnb — you may be able to claim Rent a Room Relief. This exempts the first £7,500 of gross rental income per year from income tax. You do not need to report income below this amount to HMRC. If you share the property with another person who also receives income from the let, the threshold is halved to £3,750 each.

Rent a Room Relief is available only if you are letting a room in your own home — a property you personally occupy. It does not apply to a second property, an investment property, or any property you do not live in yourself. Many Airbnb hosts are unclear on this point and apply the relief incorrectly to properties they do not occupy.

Capital Gains Tax on the Sale of a Former FHL Property

For properties that were FHL properties until April 2025, the removal of BADR eligibility has materially changed the CGT treatment on eventual sale. Under the old FHL regime, a qualifying sale could access Business Asset Disposal Relief at 18% on gains up to the £1 million lifetime limit. From April 2025, these properties are standard residential investment properties for CGT purposes, and gains are taxed at 18% or 24% depending on the seller’s income in the year of disposal.

There is no transition relief. A property that was an FHL for fifteen years and ceased to qualify after April 2025 loses all BADR eligibility on future disposal. If you have unrealised gains in a former FHL property and are considering selling, the interaction with your other income in the year of sale — and how to use the 60-day reporting rule correctly — requires careful planning. Do not complete without having the CGT position reviewed first.

Action Checklist for Short-Term Landlords in 2026/27

1. File your 2025/26 Self Assessment return by 31 January 2027 — this is the first year filed entirely under the post-FHL rules. If you were an FHL landlord in 2024/25, expect a different (likely higher) tax liability.
2. Check your VAT position. If combined Airbnb income across all properties approaches £90,000 in any 12-month period, contact us before you breach the threshold — not after. Registering late means back-charging VAT on past bookings you did not collect from guests.
3. Review mortgage interest treatment. If you have a buy-to-let mortgage on a short-term let property, model the Section 24 impact on your 2025/26 and 2026/27 tax bills. For higher rate taxpayers with significant mortgage debt, restructuring — including transferring ownership to a limited company — may warrant consideration.
4. Declare all platform income. HMRC receives your Airbnb earnings data automatically under DAC7. Ensure your Self Assessment return matches what the platform reported.
5. Seek CGT advice before selling. Former FHL properties no longer qualify for BADR. Get the gain calculated and the 60-day reporting managed by your accountant before exchange of contracts — not after completion.

Frequently Asked Questions

Is Airbnb income taxable in the UK in 2026/27?

Yes. Income from letting a property through Airbnb or any other short-term platform is taxable income in the UK. It is treated as property income for income tax purposes (or as trading income if you provide substantial services alongside the accommodation). You must declare it on your Self Assessment tax return. HMRC receives your earnings data directly from Airbnb under DAC7 reporting rules introduced from January 2024.

Can I still use my property as an FHL in 2026/27?

The FHL regime no longer exists from 6 April 2025. Even if your property meets all the old qualifying conditions — available 210 days, let 105 days, no single occupant more than 31 consecutive days — it cannot be treated as an FHL for tax purposes from 2025/26 onwards. All properties previously qualifying as FHLs are now taxed as standard residential lettings.

What is the difference between Airbnb income and normal rental income for tax?

From April 2025, the difference is minimal for most purposes. Both are treated as property income taxed under the same rules. The main practical differences are: short-term lets under 28 days may be subject to VAT (unlike long-term residential lettings which are exempt); short-term lets have higher cleaning, consumables, and platform fees as allowable deductions; and business rates may apply to short-term let properties used exclusively for that purpose rather than council tax. Speak to our property tax team about which costs apply to your specific situation.

Does Airbnb report my income to HMRC?

Yes. Airbnb is required under HMRC’s DAC7 digital platform reporting rules to report the annual income of UK-based hosts directly to HMRC at the end of each calendar year. This applies regardless of the amount earned. HMRC uses this data to identify hosts who have not declared their income on a Self Assessment return.

Do I need to register for VAT if I only let one property on Airbnb?

You must register for VAT if your total taxable turnover from short-term lettings exceeds £90,000 in any rolling 12-month period. This threshold applies to your total short-term let income — not per property. If you let only one property and your annual Airbnb income is below £90,000, you are not required to register for VAT, though voluntary registration may be worth considering if you have significant input VAT on the property. Our VAT returns team can advise.