The world of tax reporting for Airbnb hosts in the UK is about to change dramatically with the introduction of Making Tax Digital for Income Tax (MTD for ITSA), which will come into effect in April 2026. Under this new system, Airbnb hosts who meet certain income thresholds will be required to report their rental income and expenses digitally, on a quarterly basis, rather than relying on the traditional annual Self-Assessment process. This change is part of HMRC’s broader initiative to modernise the UK’s tax system, ensuring more accurate reporting and timely updates.
As an Airbnb host, whether you're renting out a spare room or managing multiple properties, this shift requires significant preparation. Understanding the phased implementation of MTD, knowing whether it applies to you, and ensuring that you’re using the right software are critical to staying compliant and avoiding costly penalties. This guide will walk you through the essentials of MTD for Airbnb hosts, including key dates, income thresholds, reporting methods, and tips to make the transition as smooth as possible.
Key Takeaways
MTD Deadline: Airbnb hosts must comply with MTD for ITSA starting April 2026 (for income over £50,000).
Quarterly Updates: Hosts must submit quarterly income and expense updates via HMRC-recognised software.
Qualifying Income: Includes Airbnb rental income, UK rental income, and self-employment income (excluding employment income, dividends, and pensions).
Penalty Relief: First-year penalty relief applies for late quarterly submissions (excluding tax payments).
MTD Software: Choose software that tracks Airbnb income, expenses, and submits quarterly updates to HMRC.
Joint Ownership: Only your share of rental income counts for MTD if you jointly own property.
Exemptions: Small-scale landlords earning under £7,500 from Rent-a-Room relief may be exempt.
Start Early: Familiarize yourself with MTD software and digitize financial records to avoid last-minute issues.
What Is Making Tax Digital for Airbnb Hosts?
Making Tax Digital For ITSA is HMRC's initiative to modernise the UK tax system by requiring sole traders and businesses earning property rental income to keep digital records, submit quarterly updates, and file a final tax return online. For Airbnb hosts who earn property income, this represents a fundamental shift from the traditional annual Self-Assessment tax return to a more frequent, software-based reporting system.
Instead of reporting your Airbnb income once a year, you'll need to submit quarterly updates through HMRC-recognised software, followed by an annual final declaration.
This isn't just about technology—it's about transforming how you manage your Airbnb business finances throughout the year rather than scrambling at the end of the tax year.
Am I Affected? Understanding the MTD Thresholds for Airbnb Hosts
Not all Airbnb hosts will need to join MTD for Airbnb hosts immediately. The MTD rollout follows a phased approach based on your qualifying income, your total gross income from self-employment and property before expenses.
The Phased Rollout Timeline
What Counts as Qualifying Income Under MTD for Airbnb Hosts?
Joint Ownership Considerations
If you jointly own an Airbnb property, only your individual share of the rental income is taken into account for Making Tax Digital.
For example, if the property earns £60,000 a year and you own it 50/50 with a partner, your qualifying income is £30,000. This means you would not need to comply with MTD for the 2024/25 tax year. However, once the MTD threshold drops to £30,000 for the 2025/26 tax year, you will be required to comply from that point onward.
How MTD Changes the Way Airbnb Hosts Report Income To HMRC?
Under MTD for airbnb hosts, you will need to:
Keep digital records of all income and expenses using compatible software
Submit quarterly updates to HMRC (four times per year)
Submit a final declaration by 31 January following the tax year
The Quarterly Update Schedule
Under Making Tax Digital for airbnb hosts, you can submit quarterly updates using one of two reporting options: standard tax-year quarters or calendar quarters. Standard quarters align with the UK tax year whereas calendar quarters can be easier if your bookkeeping already works this way. You must choose one method and use it consistently for the entire tax year.
Update | Standard Quarter Period | Calendar Quarter Period | Submission Deadline |
|---|---|---|---|
Q1 | 6 April – 5 July | 1 April – 30 June | 7 August |
Q2 | 6 July – 5 October | 1 July – 30 September | 7 November |
Q3 | 6 October – 5 January | 1 October – 31 December | 7 February |
Q4 | 6 January – 5 April | 1 January – 31 March | 7 May |
What Each Quarterly Update Must Include?
Whichever option you choose for Making Tax Digital for airbnb hosts, each quarterly update must report:
Your Airbnb rental income for the quarter
Rental expenses related to the property
Digital records of income and expenses from any other sole trading activities you carry on
These updates provide HMRC with an ongoing picture of your income but do not finalise your tax bill—this happens later through the final declaration.
What About Your Final Tax Return?
You'll still need to complete a final submission by 31 January following the tax year. This also need to be submitted digitally. This is where you'll include:
Any adjustments to your quarterly figures
Other income sources (employment, pensions, savings, dividends)
Tax reliefs and allowances
Your final tax calculation
Good News: First-Year Penalty Relief for Airbnb Hosts
HMRC has announced a "soft landing" approach for airbnb hosts joining MTD for income tax in April 2026. This is particularly important for Airbnb hosts navigating this new system.
What the Penalty Suspension Means in MTD for income tax?
No penalty points for late quarterly updates during the 2026-27 tax year if you:
Miss a quarterly update deadline
Submit updates late but before the final declaration deadline
Important: This relief only applies to quarterly update penalties. You'll still face penalties for:
Late payment of tax owed
Missing the 31 January final declaration deadline
This one-year grace period gives Airbnb hosts time to adjust to quarterly reporting without the immediate threat of penalty points accumulating.
Choosing the Right MTD Software for Your Airbnb Business
Selecting appropriate software is crucial for MTD compliance. You'll need software that can:
Essential Software Features for Airbnb Hosts
Import Airbnb transactions automatically from your account
Track booking income and associated expenses
Categorise expenses correctly (cleaning, maintenance, utilities, etc.)
Submit quarterly updates directly to HMRC
Handle multiple properties if you have more than one listing
Calculate allowable expenses specific to property letting
Support final annual declarations
Types of MTD Software for Airbnb Business
Full accounting software(Type 1):
Creates and stores digital records
Links to bank accounts for automatic import
Scans receipts and invoices
Sends quarterly updates and final returns
Best for: Hosts wanting an all-in-one solution
Bridging software (Type 2):
Connects to existing spreadsheets or tools
Allows you to continue current record-keeping methods
Submits data to HMRC on your behalf
Best for: Hosts comfortable with their current system
Preparing Your Airbnb Business for Making Tax Digital
Review your 2024-25 income:
Calculate your qualifying income to confirm when you need to join MTD. HMRC will send a letter if you're required to join from April 2026, but it's your responsibility to verify.
Organise your records:
Organise your records by gathering documentation for all your Airbnb bookings and payouts, as well as any cleaning and maintenance expenses. This should also include utility bills (if you pay them), insurance premiums, and any costs related to repairs or replacements. Additionally, keep track of professional fees, such as those paid to your accountant or property manager, to ensure your records are complete and up to date.
Research and select software:
Use our software finder tool to identify compatible products. Test several options to find one that suits your Airbnb workflow.
Digitise your record-keeping:
Begin digitising your record-keeping now, even if you’re not yet required to. This will help you identify any gaps in your record-keeping, get comfortable with the software, and establish good quarterly habits. Starting early ensures that you're fully prepared when MTD becomes mandatory, making the transition smoother and more manageable.
Consider professional support:
If your Airbnb business is more complex, with multiple properties, significant expenses, or other income sources, consider seeking professional support. A tax agent can help you sign up for MTD, manage your quarterly submissions, ensure you claim all allowable expenses, and handle your final declaration, making the process easier and more accurate.
Special Considerations for Airbnb Hosts Under MTD for Income Tax
Rent-a-Room Relief
If you're renting out a room in your main home and earn under £7,500 annually, you can claim Rent-a-Room relief and may be exempt from MTD for income tax for Airbnb hosts. However, if your total qualifying income (including other sources) exceeds the threshold, you'll still need to join.
Mixed Property Portfolios
Many Airbnb hosts also have long-term rentals. Your MTD software must handle both:
Short-term letting income (Airbnb)
Long-term rental income (traditional BTL)
UK and foreign properties (if applicable)
All property income counts toward your qualifying income of MTD thresholds for Airbnb hosts.
When Airbnb Hosts Are Exempted From MTD for Income Tax?
Automatic exemptions
You are automatically exempt from MTD for Income Tax in certain situations, including where you do not have a National Insurance number.
Apply-for exemptions (digital exclusion)
If you are digitally excluded, you are not automatically exempt in the usual sense — you generally need to apply to HMRC for an exemption. “Digitally excluded” can include being unable to use digital tools because of age, disability, health, lack of internet access/location, or religious beliefs that prevent using electronic communication. HMRC provides a formal application process and recommends applying before you are required to start MTD.
Who Qualifies for Deferred MTD Start?
Some individuals are not required to join MTD until at least April 2027 due to their circumstances. This is a deferral, not a permanent exemption. Groups commonly included in this deferral include non-UK residents and people with more complex tax affairs such as those who receive trusts and estates income (and other categories HMRC has confirmed as delayed).
Some individuals are not required to join MTD for Airbnb hosts until at least April 2027 due to their circumstances. This is a deferral, not a permanent exemption. Groups commonly included in this deferral include non-UK residents and people with more complex tax affairs such as those who receive trusts and estates income (and other categories HMRC has confirmed as delayed).
Important
If you think you qualify for a digital exclusion exemption, you should apply to HMRC in advance using their published process. If you fall into a deferred category (for example, certain non-resident cases), you may be brought in later, so you should still monitor HMRC guidance.
