Making Tax Digital (MTD) is changing how Airbnb hosts and other short-term rental providers report their income to HMRC. Instead of relying solely on an annual Self Assessment tax return, MTD requires digital record-keeping and quarterly submissions using HMRC-approved software. For Airbnb hosts, this covers income from bookings, cleaning fees, service charges, and other rental-related revenue, as well as expenses such as property management, utilities, cleaning, maintenance, and Airbnb service fees.
While MTD may feel like an extra administrative task, it can actually simplify tax management. Digital record-keeping allows hosts to monitor rental income, track deductible expenses, and stay on top of cash flow throughout the year. With the right systems in place, quarterly reporting becomes easier, reducing errors and ensuring compliance with HMRC. Even small-scale or part-time hosts can benefit from better oversight of their rental business.
Who Making Tax Digital Applies To (and Who Is Not in Scope Yet)
Making Tax Digital for Income Tax applies primarily to self-employed individuals and small businesses, which includes many Airbnb hosts who earn above certain thresholds. Whether MTD applies depends on gross income rather than profit, and on how the host operates their rental activity.
From 6 April 2026, Airbnb hosts with gross qualifying income over £50,000 per year must comply with MTD for Income Tax. The threshold reduces to £30,000 from April 2027, and further to £20,000 from April 2028, bringing more part-time and small-scale hosts into scope.
It’s important to remember that gross income includes all rental income received, even if some of it is spent on allowable expenses like cleaning, utilities, maintenance, and Airbnb service fees. VAT-registered hosts are already required to comply with MTD for VAT, regardless of income level.
Hosts operating below the thresholds are not yet required to comply, but may voluntarily adopt MTD to streamline their accounting and record-keeping. Knowing whether your Airbnb income is in scope allows you to prepare your systems and ensure a smooth transition when MTD obligations begin.
When Airbnb Hosts Need to Start Complying – Key MTD Dates
Making Tax Digital for Income Tax is being introduced gradually, with hosts being brought in based on their gross income. Understanding these dates ensures you can plan and avoid last-minute compliance issues.
- From 6 April 2026, Airbnb hosts with gross income over £50,000 per year must comply with MTD. This requires keeping digital records and submitting quarterly updates using HMRC-approved software.
- From 6 April 2027, the income threshold reduces to £30,000, including more small-scale and part-time hosts.
- From 6 April 2028, the threshold drops further to £20,000, bringing nearly all Airbnb hosts with regular bookings into scope.
Airbnb hosts who are VAT-registered must comply with MTD for VAT, regardless of their rental income. Hosts whose income fluctuates should monitor earnings closely, as a particularly busy period could trigger MTD obligations earlier than expected. Preparing early with digital systems and regular bookkeeping ensures compliance is straightforward and reduces the risk of penalties.
How Making Tax Digital Works in Practice for Airbnb Hosts
Keeping Digital Records
Under MTD, Airbnb hosts must maintain digital records of all income and expenses. This includes:
- Rental income from bookings
- Cleaning fees or extra service charges
- Property management fees
- Utilities, maintenance, and repairs
- Airbnb service fees
Paper records or standalone spreadsheets are no longer sufficient. Hosts must use MTD-compliant software to ensure records are accurate and ready for quarterly submission.
Submitting Quarterly Updates
Instead of a single annual Self Assessment, hosts must submit quarterly updates to HMRC summarising income and expenses for the reporting period. These updates provide HMRC with a running view of your taxable income and help reduce year-end surprises.
Standard reporting periods and deadlines:
- Quarter 1: 6 April – 5 July → Deadline 7 August
- Quarter 2: 6 July – 5 October → Deadline 7 November
- Quarter 3: 6 October – 5 January → Deadline 7 February
- Quarter 4: 6 January – 5 April → Deadline 7 May
End-of-Year Declaration
At the end of the tax year, hosts submit a final declaration confirming total income, allowable expenses, and any adjustments. Since most data has already been submitted quarterly, this final submission is simpler and less error-prone.
Practical Benefits for Hosts
MTD encourages Airbnb hosts to keep their bookkeeping up to date, making it easier to track profits, cash flow, and expenses. Regular digital records also simplify end-of-year filing and provide better visibility of business performance.
Common Mistakes Airbnb Hosts Make Under MTD and How to Avoid Them
Using Paper Records or Non-Compliant Spreadsheets
Many hosts still rely on handwritten notes or basic spreadsheets. Under MTD, all income and expenses must be recorded digitally using HMRC-approved software. Using non-compliant methods increases the risk of errors and late submissions. Switching to software early ensures accuracy and smooth quarterly reporting.
Delaying Record-Keeping
Some hosts wait until the end of the month or quarter to update their records. This often leads to missing transactions or incorrect entries. Recording income and expenses weekly, or after each booking, keeps your records accurate and reduces year-end stress.
Mixing Personal and Rental Finances
Using a personal bank account for both personal and Airbnb-related transactions can create confusion and increase errors. Maintaining a separate business account for your Airbnb income and expenses simplifies record-keeping and ensures compliance.
Incorrectly Categorising Income or Expenses
Misclassifying income (e.g., cleaning fees vs rental income) or expenses (e.g., personal utilities vs property maintenance) can distort taxable profits. Proper categorisation in your accounting software is essential to maintain accurate records for HMRC.
Missing Quarterly Submission Deadlines
Quarterly updates must be submitted on time. Late submissions can result in penalties. Using software notifications or calendar reminders helps ensure deadlines are met:
- Q1: 6 April – 5 July → 7 August
- Q2: 6 July – 5 October → 7 November
- Q3: 6 October – 5 January → 7 February
- Q4: 6 January – 5 April → 7 May
Assuming MTD Only Affects Large Hosts
Some hosts believe MTD applies only to full-time or high-income Airbnb hosts. With thresholds dropping to £50,000 in 2026, £30,000 in 2027, and £20,000 in 2028, even small or part-time hosts will fall within scope. Early preparation avoids last-minute compliance issues.
Practical Tips for Airbnb Hosts to Stay Compliant with MTD
Use MTD-Compliant Accounting Software
Choose a software that HMRC approves. Ensure it can track rental income, cleaning fees, Airbnb service charges, and deductible expenses, including property maintenance, utilities, and management fees. Early adoption allows you to get familiar with the system before deadlines.
Separate Personal and Rental Finances
Maintain a dedicated bank account for your Airbnb business. Recording only rental-related income and expenses helps avoid errors and makes quarterly reporting easier.
Update Records Regularly
Record bookings, payments, and expenses weekly or after each rental period. Regular updates reduce the risk of mistakes and make quarterly submissions smoother.
Set Reminders for Quarterly Deadlines
Keep track of quarterly update deadlines and set calendar alerts or software notifications:
- Q1: 6 April – 5 July → 7 August
- Q2: 6 July – 5 October → 7 November
- Q3: 6 October – 5 January → 7 February
- Q4: 6 January – 5 April → 7 May
Meeting deadlines helps avoid penalties and keeps your account in good standing with HMRC.
Categorise Income and Expenses Correctly
Ensure that all income streams and expenses are properly classified. Distinguish between rental income, cleaning fees, Airbnb service charges, and deductible costs like maintenance, utilities, and property management. Correct categorisation prevents errors and improves tax reporting accuracy.
Reconcile Accounts Regularly
Compare your bank statements with your digital records to ensure all income and expenses are accurately recorded. Regular reconciliation reduces errors and simplifies quarterly updates and year-end filings.
Seek Professional Advice When Needed
If you have multiple properties, complex expense claims, or are VAT-registered, consulting an accountant familiar with MTD for Airbnb hosts can save time and prevent costly mistakes. Even a short professional review can help ensure compliance and peace of mind.
Conclusion
Making Tax Digital may feel like a significant change for Airbnb hosts, but with the right preparation and tools, it is entirely manageable. By keeping digital records of all bookings, cleaning fees, service charges, and expenses such as property maintenance, utilities, and management fees, hosts can ensure quarterly submissions to HMRC are accurate and complete. Regular updates, proper categorization, and use of MTD-compliant software not only ensure compliance but also provide a clear view of income, cash flow, and profitability throughout the year.
It’s also important to plan, as income thresholds will reduce to £50,000 in 2026, £30,000 in 2027, and £20,000 in 2028, meaning more part-time and small-scale hosts will come within scope. By following practical tips, updating records regularly, keeping finances separate, reconciling accounts, and seeking professional advice when needed, Airbnb hosts can avoid penalties and simplify tax management. With the right systems in place, Making Tax Digital can be a useful tool for streamlining accounting, improving financial oversight, and enabling hosts to focus on delivering great guest experiences.
