Rent out your spare room in London with Airbnb and Wimdu - and earn income tax-free

Earn up to £4,250 a year tax free by signing up to a website offering short-term lets.
Renting out your spare room by the night to strangers may not appeal to everyone, but for thousands of Londoners these short-term lets are becoming a source of extra income. Nightly rates can be high compared to having a permanent lodger — and you choose when your home is available.
Home-rental website Airbnb has become a go-to site for bookings from overseas visitors coming to the capital for big events such as the Rugby World Cup, which runs until the end of October. Residents of Twickenham, venue for 10 of the matches, are said to be charging an average of £114 a night for a room.
A typical Airbnb “host” in London makes about £2,800 a year from 33 nights of rentals, says the site — an average of £85 per night.
And unless your earnings from such lettings really mount up — or you’re renting out the whole property — this income is tax-free.
The Government’s “rent-a-room” allowance means that, as with having a conventional lodger, households can receive up to £4,250 a year tax free from short-term room lettings. This tax break will increase to £7,500 from next April, the Chancellor announced in this summer’s Budget.
It is free to list rooms for rent on Airbnb and similar sites like Wimdu. Hosts set their own prices and availability, and decide which “guests” to let to. Airbnb charges hosts three per cent commission on bookings. It also charges guests between six and 12 per cent. With Wimdu, hosts do not pay commission, but guests are charged a processing fee on top of the room rate. 
Life’s little luxuries: in a great location in Hampstead, this three-bedroom flat comes with a hot tub and sauna. Sleeping up to eight, it can be rented for £1,250 a week through Airbnb
Airbnb has more than 20,000 listings in London and says properties are generally away from the main hotel districts. The company says it offers tourists an opportunity to “rent unique spaces and live like a local”.
Julia Macmillan, an internet entrepreneur, lets out the second bedroom of her Camden flat for £68 a night via Airbnb. She has been a host with the site since 2012 and earns up to £6,000 a year from about 80 nights of lettings.
She does not provide breakfast and sets a minimum stay of five nights. “It’s not really worth it for fewer nights,” she says, given the need to clean between guests and arrange check-ins.
While some hosts talk of the attraction of having guests from around the world, Macmillan says her main motivation is the money, with the nightly rate being about twice the equivalent she would receive from a full-time lodger.
Her bookings range “from students to 70-year-olds”. “People are generally very respectful that this is your home,” she says, adding that the only bad experience has been “feeling awkward” with some young visitors.
Other hosts have had bigger problems, with significant damage to properties and guests even refusing to leave at the end of their stays.
With Airbnb and Wimdu, hosts can vet guests by checking their site profile and messaging them about their plans. After a visit, hosts as well as guests can add reviews of each other to the site. 
Payments are processed via the sites and hosts can ask for a security deposit to cover potential damage. Airbnb also has a “Host Protection Guarantee” for up to £600,000 of damage — though it says this should not be regarded as a replacement for home insurance. For example, it does not cover a property’s common areas or cash going missing from the home.

GoCompare, the insurance comparison service, urges households to check with their insurer before becoming hosts, as policies may not cover having paying guests.
“If you don’t tell your insurer, your policy could be invalidated,” it warns.
Households should ensure their insurance includes public liability cover in case a guest injures themselves on or around your property. Policies may also exclude cover for theft unless there are signs of a break-in. 
The British Insurance Brokers’ Association says hosts may need to pay “a little more” for home insurance, and has details of brokers specialising in cover for property-sharing.
How to be a good host
  • Ensure guest bedrooms and shared areas — including kitchen and bathroom surfaces — are cleaned before each guest arrives.
  • Change sheets and towels.
  • Stock up on loo rolls.
  • Co-ordinate arrival (and departure) — let your guest know if you’ll greet them in person or tell them where they can find your key.
  • When guests arrive, open the door with a smile.
  • Introduce them to the household, including any pets.
  • Offer a cup of tea or coffee.
  • If serving breakfast, tell guests the night before what time you expect them at the table.
Source: Airbnb; Debrett’s/Airbnb Guide to Homesharing Etiquette

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