Homeowners are looking for ways to combat rising energy costs and the cost of living crisis. An unused annex or outbuilding holds the potential to become an important source of passive income for homeowners. This opportunity comes as new research from IW Capital found that 39% of Brits see passive income sources as a way to supplement their 9-5 salary.
David Hannah, Group Chairman of Cornerstone Tax, suggests that by taking the necessary steps needed to make your annex or outbuilding Airbnb ready, property owners have the chance to create a significant new revenue stream averaging at £6,000 a year. This amounts to the equivalent of two months paid salary for the median UK household, and UK hosts on Airbnb collectively earned more than £1.5 billion last year. Homeowners have the ability to decide the nightly price they charge on their property and research from the company showed that half of all new listings received a booking within five days of activation.
As Brits are forced to cut costs due to rising prices, David Hannah expects staycations will remain popular for UK travellers. With major events taking place across the country in 2022, including the Queen’s Platinum Jubilee, Women’s Euro 2022 and the Commonwealth Games, Airbnb hosts could be set for a lucrative year. Hannah states that whilst the demand for UK Airbnb properties is evident, it is critical you take the right steps to prepare your annex or outbuilding before making it available.
David Hannah, Group Chairman at Cornerstone Tax discusses the steps you need to take when getting a property ready to be an Airbnb:
“We’ve all seen the rise in the cost of living and energy costs and, during the course of the pandemic, the increase in the trend of staycations. The likely restriction in consumer spending power may well encourage people to carry on holidaying in the UK. You may be facing increasing bills on your property and thinking that your unused annex or outbuilding could be used as an Airbnb for people who want to staycation in the English countryside. So, how do you go about doing it?
“Well, it comes in three stages: the first stage in getting an annex or outbuilding ready is to make sure it’s suitable for people to stay. That means you’re going to have to go through that building and make sure it contains all the basic necessities for living – it’s got to have somewhere to cook, somewhere to bathe, somewhere to go to the toilet and of course, somewhere to sleep. It’s got to be suitable for use as a dwelling. More importantly, if you’re dealing with an annex, you’re probably already up to domestic insulation standards, but if you’re converting an outbuilding you’re going to need to think about insulating it. Making it green, maybe installing a log burner or some other form of heating. But ultimately, what you are going to need, above all else, is planning permission. This could take several months depending on where you are and the state of your property. Let’s assume that you can get all that in place – what do you do next?
“You need to make sure that your annex or converted out building has a separate meter, not necessarily a separate account, so that you can recover part of the costs of electricity and heating against the income that you earn from Airbnb. The important thing is to count everything that you use wholly and exclusively in that business and put it into your accounting software and claim it against your income tax – maximising the return. Airbnb, running holiday cottages, that’s a business of holiday letting and you’re going to need to register yourselves with HMRC as having this new trade so that you can do self-assessment returns at the end of the tax year.
“When you’ve got all that sorted, you’re ready to run and you’ve got to market it. This means you have to upload it to Airbnb, you might even want to build your own website to increase the promotion. You’re ready now, it’s open and you’ve got guests booked in. It’s a chance to make a separate source of revenue which is extremely useful in these times.”