Can I rent my property out as an Airbnb?

Renting out your property on Airbnb can be a lucrative way to make cash from your home. We look at the pros and cons and what you need to bear in mind.

Can I rent my property out as an Airbnb?

As long as you are the property owner and not a tenant, you can rent your property or part of your property out on Airbnb. In some cases, you may need to get permission from your mortgage lender. 

If you live in London, you can rent your property out on Airbnb for 90 days a year without needing permission from the local council. 

Do I need to tell my mortgage lender?

It’s most likely that you will need to inform your mortgage lender of your intention to rent out your property on Airbnb to avoid being in breach of your mortgage contract. 

However, some lenders now allow homeowners to rent out their properties on Airbnb for a certain period, without the need to inform them in writing.

For example, NatWest permits its mortgage holders to do so, as long as it is for a maximum of 90 days a year. 

What are the tax implications of renting out my property as an Airbnb?

Like any other income you receive, you will be liable to pay tax on any earnings from your Airbnb rental. Currently, the annual personal allowance – what you can earn before you start paying tax – is £12,500. 

You may also be able to claim under the government’s Rent a Room scheme or, if your Airbnb is deemed a holiday let for tax purposes, for expenses relating to your Airbnb, such as a portion of utility bills and replacement items. 

Do I qualify for the Rent a Room scheme?

As an Airbnb host, you could benefit from the government’s Rent a Room scheme, which enables you to earn £7,500 tax-free a year from letting out either your spare room or your entire home, as long as it’s your main residence. 

The scheme applies whether you take in a lodger, run an Airbnb or have short-term guests rent a room or your entire property, as long as it is your main place of residence. It applies to properties in England, Wales, Scotland and Northern Ireland. 

However, depending on how much income you expect to make, you will have to decide whether to claim on the Rent a Room scheme or claim tax-deductible expenses for your Airbnb as a holiday let. This is because you cannot do both. 

If you anticipate earning substantially more than £7,500 a year for your Airbnb, it makes more sense to treat it as a holiday let for tax purposes and claim individual expenses. 

Rental income from residential property is generally exempt from VAT. However, if you have a separate property that you rent out as a holiday let, you will have to charge VAT on it at a standard rate of 20%. 

You may also have to register for VAT if you earn more than the VAT threshold of £90,000 a year from your Airbnb. However, you can claim back VAT on expenses, such as maintenance costs, repairs and any services you provide to guests. 

What can I claim expenses on?

If your Airbnb is treated as a holiday let and not registered for the Rent a Room scheme, you can claim for items such as cleaning, certain repairs, a portion of your council tax and utilities bills and even mortgage interest.   

Hosts can also claim for capital expenditure such as replacing TVs, fridges, furniture and other major items. 

However, for some items you are replacing, you can only claim on a like-for-like basis.

So, if you buy a much more expensive version, such as a bigger television or fridge freezer with more bells and whistles, you may only claim the difference in cost between that and an equivalent of the original item. 

What about capital gains tax?

If the property you are renting out on Airbnb is your own residence, you will not be liable for capital gains tax on any profits made if you sell it. However, if you have additional properties you are using as an Airbnb and sell them, you may be liable for capital gains tax on any profit you make. 

If you are a basic rate taxpayer, you will pay 18% on the profits from the sale, while if you pay higher rate tax, you will be liable for 24%. 

However, the tax-free capital gains allowance is £3,000 in the 2025/26 tax year. If you earn any profit under this amount, you don’t need to pay capital gains tax on the gain.

Will I have to pay business rates?

It may depend on how many days a year your property is available as an Airbnb. Typically, residential properties are only subject to council tax. 

However, properties available for short-term let for 140 days or more may be subject to business rates.

What are the insurance implications?

While it could be a great way to earn extra income, opening your home up on Airbnb does introduce additional risks to your property and belongings. 

Airbnb provides a certain level of insurance cover to Airbnb hosts automatically via its Aircover policy, which in the UK is underwritten by insurer Axa. Each host gets access to $3 million (£2.2 million) in compensation for property damage.

However, this doesn’t cover every eventuality, so you may find that you need to arrange additional cover to ensure you’re adequately protected. 

Aircover covers hosts for unexpected cleaning and repair costs caused by guests or their pets that they refuse to pay for, physical damage or losses caused by guests’ unauthorised visitors, and loss of income due to the necessary cancellation of subsequent bookings. 

For example, you can receive compensation for deep cleaning if someone smokes in your home and leaves smoke residue before new guests are set to arrive. In addition, valuables and art, plus any vehicles or boats parked at your home, are also included in the insurance coverage. 

Aircover also provides $1 million (£738,280) in coverage for guest injuries. 

However, it does not cover damage to neighbours’ property by guests or to their cars, mould, damage that occurs when guests aren’t staying, wear and tear and natural disasters.   

As part of the package, there is also a 24-hour safety phone line, where hosts can speak to a security specialist if they have any concerns about their guests. 

Don’t forget also that Aircover only applies if the guests have booked through Airbnb, not other hosting platforms. 

It may be worth considering additional cover for personal injury, in case guests injure themselves while staying at your property, and property damage. 

What are the pros and cons of renting my home out on Airbnb?

On the plus side, you may get the opportunity to earn useful extra income from your home and benefit from government tax breaks. Running an Airbnb may be a handy way to diversify in tough financial times and run a business from home. 

However, you must ensure that you comply with regulations, ensuring that your property and its contents are safe for guests to use, and that you have the requisite insurance cover in place. 

Get expert financial advice 

There’s a lot to consider before renting your property out via Airbnb, including getting the right insurance policy. 

Let Unbiased help you find out more about your options by matching you with a qualified insurance broker, mortgage or financial adviser today.