HM Revenue & Customs has launched a crackdown on the booming short-term lettings market by initially targeting about 1,000 property owners that it suspects have not paid enough tax.

Based on information received from online bookings platforms such as Airbnb, the UK tax agency is sending its first so-called “nudge” letters this month to those it believes have not declared income earned from rentals on their self-assessment tax returns. Recipients of the letters have been given 30 days to respond or risk a formal inquiry into their tax affairs.

HMRC’s scrutiny comes as the holiday rentals market has grown rapidly in recent years, helped by the preferential tax treatment of short-term lettings compared with traditional buy-to-let rentals.

About 127,000 individuals in the UK declared ownership of businesses for furnished holiday lets in their personal tax returns in the 2019-20 tax year, the latest year for which data is available.

Airbnb does not give a geographical breakdown of rental numbers by country but analysis by the Guardian in 2020 showed its active UK listings jumped from 76,000 to 257,000 between April 2016 and January 2020. Airbnb said last year that the typical UK host earned just over £6,000 per year.

“Whilst there are always exceptions, I think the missing tax from short-term lettings is more likely to be accidental than deliberate,” said Stefanie Tremain, partner at accounting firm Blick Rothenberg.

She added that the property income regime is now “very complicated following years of tweaks to the legislation” and HMRC does not accept ignorance of the rules as an excuse.

David Fell, senior analyst at estate agency Hamptons International, said that some traditional buy-to-let investors have moved into holiday lets owing to their “more favourable tax treatment”. 

In contrast to rules for longer-term lettings, owners of properties designated as holiday homes can benefit from allowances, including full income tax relief for mortgage interest deductions and lower capital gains tax on their sale.

Chris Etherington, partner at accounting firm RSM, said that following the initial campaign the tax authorities could start looking at whether furnished holiday let landlords “have met the strict letting criteria”.

A report by the Office of Tax Simplification in November — published shortly before the statutory body was closed down — urged ministers to review the sector’s complex tax regime.

HMRC does not have an estimate of how much tax from the short-term lettings market remains unpaid, but said it is working with online rental platforms “to build a more detailed understanding of the sector and who is operating in it”.

Last summer, the government launched a consultation proposing the introduction of a national register for short-term lettings, which could help with tax collection.

HMRC described nudge letters as “routine activity” and added: “We believe our customers want to pay the right amount of tax . . . we’re taking steps to help make it as easy as possible for people to get their tax right.”

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