How to cash in on this summer’s staycation boom
How to cash in on this summer’s staycation boom
January is a bumper month for the travel industry. This year, while the rush is still on, the destinations are a little closer to home.
With news that travellers returning from Covid hotspots will have to quarantine in hotels, many people who had planned a foreign holiday have now decided to stay in the UK.
Demand for staycation accommodation is predicted to massively outstrip supply – so if you’ve ever considered making some extra money from renting your home out, is now the time to do it? It could be a great opportunity to make some extra cash, which could help offset some of the economic consequences of the worst recession on record.
The amount of money you could pocket by renting out a room – or your whole home – varies depending on where you live and the size of your property.
Research from Vanquis Bank showed that in Manchester, for example, property owners could make an annual average of £7,124 from renting out a private room in a home, one night a week for a year. In Cardiff it’s around £6,344; in Brighton the figure is roughly £5,824, while Belfast residents could be looking at £4,108.
But before you list your home, there are lots of factors to consider if you want to do it safely and legally.
To start with, you’ll need to decide where to advertise. The best-known website is Airbnb, where hosts pay a 3 per cent charge and guests pay a fee of up to 14 per cent. You can rent out a room, or your entire home – which will require advance cleaning – and will have to implement other measures, including hosts and guests wearing masks and social distancing, to help prevent the spread of Covid-19.
Airbnb isn’t the only game in town, though. Others include HomeAway, which charges a 9 per cent commission on bookings or a £249 annual fee, or HouseTrip, which charges a 3 per cent fee.
Once you’ve found somewhere to list your home, you need to think about the legal side of things.
Usually, you will need to own your property, and you may need to tell your mortgage provider and your home insurer beforehand.
Most house listing companies will offer a basic level of protection for those staying and for your property. This should provide protection against someone trashing the place, or any legal disputes which may arise.
However, most of these policies don’t provide any cover for theft or accidental damage.
While you may have more protection from a contents or buildings insurance policy, most also exclude things like theft, malicious damage, or vandalism caused by paying guests.
In fact, insurer Aviva warns that where accidental damage cover is in place, damage caused by paying guests, or which happens while the home or any part of it is lent, let, or sub-let, is excluded.
There is also usually a limit on the number of days for which someone can rent out their home for a short-term holiday let, which will be detailed in the policy document.
We’ve all heard the horror stories, and Aviva’s research suggests 60 per cent of people who have let their property before have experienced an incident with guests.
Just over half of this group said that some of their possessions had been damaged; 48 per cent had things stolen; 38 per cent had faced a domestic disturbance, with the police or neighbours getting involved; while 18 per cent said guests left their homes in an unacceptable state.
However, while these statistics are enough to put anyone off opening their doors to strangers, there are things you can do to mitigate the risk to you and your home.
“For peace of mind, we’d encourage homeowners to remove or lock away any valuables or easily damaged items while guests are in their homes,” says Sarah Applegate, head of risk for Aviva.
“Around half of hosts have seen something damaged or stolen when they’ve let out their homes, so this can help to minimise holiday headaches.”
Most rental sites, including Airbnb, will also allow you to charge a security deposit – so this can always be used should problems occur. It’s also worth thoroughly vetting your guests before you agree to a booking, and speaking to them either on the phone or through a video chat.
There are tax considerations as well to consider.
If you own the property, you have a “property allowance” and can make £1,000 from it tax-free each year. If you earn between £1,000 and £2,500, you’ll need to contact HM Revenue & Customs (HMRC) and it may ask you to pay tax on the extra and fill out a self-assessment tax return.
If your income is between £2,500 to £9,999 after allowable expenses, or £10,000 or more before allowable expenses, you’ll also need to do a tax return.
Lucy Cohen, co-founder of the online accountancy company Mazuma, explains: “Allowable expenses are things that you need to spend money on in the day-to-day running of the property, such as letting-agency fees, buildings and contents insurance, maintenance (but not improvements), utility bills, phone calls, stationery and advertising.
“If you are renting out your own residential home that you live in, then costs must be apportioned to the amount of time that relates to it being rented out – you can’t just go putting all your normal living expenses through.”
Renting out a property for a short-term holiday shouldn’t be confused with a longer-term let either, such as if you have a lodger. The Rent a Room Scheme comes into play here – it lets you earn £7,500 per year tax free when you let out a furnished room in your house where you also live.
And don’t be tempted to start renting out your place without telling the taxman. Daniel Tomassen, Tax Manager for accountancy firm HW Fisher, warns: “It’s worth remembering that Airbnb shares data with HMRC on income received by hosts who use the platform.
“If the taxpayer does not disclose the income then penalties for omission may be applied.”