When you book an Airbnb room in London, around a third of the $100 saving you make over the price of an average hotel room is due to tax advantages that favour Airbnb’s business model, according to research by the Financial Times.
The extent to which Airbnb’s business model benefits from tax advantages is particularly evident in London because the UK has high rates of business property taxes and value added tax on hotel stays, combined with generous tax exemptions for owners renting rooms in their homes and for small businesses.
VAT and property taxes account for up to 17 per cent of the price of a typical London hotel room after the recovery of VAT paid on costs. The VAT on most Airbnb stays can be as little as 0.6 per cent because the UK only levies the tax when businesses sell more than £83,000 per year — a threshold reached by very few Airbnb hosts. It is otherwise only payable on Airbnb’s booking and service fees.