The countdown to Making Tax Digital for Income Tax (MTD For ITSA) has begun, and Airbnb hosts across the UK need to prepare for significant changes in how they report their rental income. With the April 2026 deadline fast approaching, understanding how MTD affects your letting business is crucial for staying compliant and avoiding penalties.
Whether you're renting out a spare room or managing multiple Airbnb properties, this guide breaks down everything you need to know about MTD for Airbnb hosts.
What Is Making Tax Digital and Why Should Airbnb Hosts Care?
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.
Find out If you Need to Join MTD for Income Tax
Am I Affected? Understanding the MTD Thresholds for Airbnb Hosts
Not all Airbnb hosts will need to join MTD immediately. The 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 for Airbnb Hosts?
Your Qualifying Income includes:
All Airbnb rental income (your gross earnings before expenses)
Income from other UK properties you rent out
Foreign property income (if you're a UK tax resident)
Self-employment income (if you also run other businesses)
What doesn't count:
Employment income (PAYE)
Partnership income
Dividends
State or private pensions
Example scenario: You earn £35,000 from your Airbnb property and £20,000 from a separate long-term rental. Your qualifying income is £55,000, exceeding the threshold of £50,000 for tax year 2024/25, meaning you must join MTD from April 2026.
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, Airbnb hosts 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, 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, 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 those joining MTD in April 2026. This is particularly important for Airbnb hosts navigating this new system.
What the Penalty Suspension Means?
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
The relief only applies to penalties for late quarterly updates. However, you will still face penalties for late payment of any tax owed or if you miss the 31 January final declaration deadline.
Choosing the Right MTD Software for Your Airbnb Business
Selecting appropriate software is crucial for MTD compliance. You'll need software that can:
Essential 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 Software Available
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 MTD
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:
Organize 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
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. 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 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 threshold.
Exemptions: When Airbnb Hosts Don't Need MTD
Permanent exemptions
Automatic exemptions | Apply-for exemptions (digital exclusion) |
|---|---|
You are automatically exempt from MTD for Income Tax in certain situations, including where you do not have a National Insurance number. | 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. |
Deferred start groups (temporary deferral)
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).
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.
