You’ve inherited some money and you’re ready to invest in property. But with the buy-to-let market changing, you’re wondering if Airbnb is the better bet. The FT’s financial expert answered a reader’s question on the tax changes that could make or break their property plans.

The Big Changes Coming in 2025

Currently, Airbnb hosts enjoy some pretty sweet tax perks. These perks, known as “furnished holiday let” (FHL) benefits, mean they pay less tax on their earnings and can claim more expenses. But the government is pulling the rug out from under these benefits next year!

That means from April 2025, Airbnb hosts will be treated the same as traditional landlords. You’ll have to follow the same rules, which means less tax relief and a bigger chunk going to HMRC.

What’s in it for You?

Capital Allowances:

Right now, Airbnb hosts can get a big chunk of tax relief for buying furniture and equipment. This can be a real game changer, especially in the early days when you’re investing a lot of cash and your income hasn’t settled down.

For traditional landlords, this relief is pretty limited.

Retirement Planning:

When it comes to retirement, Airbnb income gives you a tax advantage over buy-to-let income.

Capital Gains Tax:

When you sell your property, you’ll pay less capital gains tax if it was an Airbnb property than if it was a traditional buy-to-let.

The Takeaway – Time is of the Essence

With these tax benefits disappearing soon, you need to act fast! If you’re thinking of investing in property, now is the time to capitalise on these benefits.

Beyond Tax – Weighing Up the Income

While tax is a big factor, it’s not the whole story. Airbnb can often rake in a lot more cash than traditional rentals. Don’t let a small tax saving blind you to the potential for bigger profits.

The Bottom Line

The decision to choose Airbnb or traditional buy-to-let depends on your individual circumstances. Make sure you factor in the upcoming tax changes, the potential income, and your own skills and resources. With a bit of planning, you can make a smart move and turn your inheritance into a profitable property portfolio.