How Does MTD for Income Tax Work for Airbnb and Short-Term Lets?

Understanding MTD for Income Tax for Airbnb and Short-Term Lets

Making Tax Digital (MTD) for Income Tax can sound like yet another HMRC initiative that only accountants enjoy talking about. But if you earn money from Airbnb or any kind of short-term letting, it matters because it changes how you keep records and how you send updates to HMRC. The good news is that once you understand the moving parts, MTD becomes less of a scary “digital compliance” project and more of a practical routine: track your income and expenses as you go, send quarterly updates, and finish up with a final declaration after the tax year ends.

This is especially relevant for short-term lets because the activity often creates lots of small transactions: multiple guest payments, cleaning fees, platform service charges, refunds, and expenses that hit at different times. That’s exactly the sort of situation where digital record keeping shines—provided you use the right tool. A free invoicing app like invoice24 can make that routine much easier by keeping your paperwork tidy, separating categories, creating receipts/invoices when needed, and giving you a clear view of profit over time. If you also run a limited company for property or a broader hospitality business, invoice24 can support the wider admin too, including the features you’d expect around accounts and corporation tax workflows.

In this article, we’ll break down how MTD for Income Tax works for Airbnb and short-term lets, what you need to track, how quarterly updates fit together, how to handle tricky scenarios like joint ownership and mixed personal/business use, and how to stay organised without drowning in spreadsheets.

What Is MTD for Income Tax in Plain English?

MTD for Income Tax (often described as “MTD ITSA”) is the part of Making Tax Digital aimed at people who pay income tax through Self Assessment. Instead of doing all record keeping in a manual way and sending one annual tax return at the end of the year, MTD introduces a more regular, digital rhythm:

1) Digital records throughout the year (income and expenses recorded in a digital format).

2) Quarterly updates submitted to HMRC (a summary of income and expenses for each quarter).

3) End-of-period statement (EOPS) for each business at the end of the tax year (finalising the figures and adding adjustments).

4) Final declaration (confirming all income sources and completing the equivalent of the Self Assessment “sign-off”).

For Airbnb and short-term lets, this doesn’t mean you’ll be filing a full tax return four times a year. Quarterly updates are summaries, not the final calculation. You still finalise the tax year after it ends. But it does mean you’ll want a system that keeps your records accurate and up to date rather than trying to reconstruct everything from bank statements in January.

Does MTD for Income Tax Apply to Airbnb Hosts and Short-Term Let Owners?

If you earn income from Airbnb or other short-term letting platforms, you’re typically taxed as a property business (unless the arrangement is part of a larger trading activity, which is less common). MTD for Income Tax is designed to cover individuals with certain levels of income from self-employment and property.

In practical terms, if you’re a UK taxpayer who declares property income on Self Assessment and you fall within the scope of MTD ITSA (based on HMRC’s rules and rollout timetable), you’ll need to keep digital records and send quarterly updates using MTD-compatible software.

This is where your setup matters. Some hosts treat Airbnb income casually, but HMRC expects the same good record keeping you’d apply to any other source of taxable income. That includes tracking platform fees, allowable expenses, and the timing of transactions.

It’s worth highlighting that many short-term letting arrangements sit somewhere between “simple property income” and “hospitality-like activity.” That can create confusion. MTD doesn’t remove the need to understand your tax position (for example, whether you’re within the furnished holiday lettings rules if they apply to your property, or whether your activity is simply standard property income). But MTD does push you toward consistent digital tracking regardless.

What Counts as “Income” for Airbnb and Short-Term Lets?

When you open your Airbnb payout screen, it can look like your “income” is the payout amount landing in your bank account. But for tax record keeping, you usually need to capture the real picture: what the guest paid, what fees were taken, and what you received net.

Common income lines you may encounter include:

Nightly rate / accommodation charge: the core rental income.

Cleaning fee charged to the guest: often taxable income, even if you pay it out to cleaners.

Extra guest fees: if you charge more for additional guests.

Pet fees or other extras: if applicable.

Refunds or partial refunds: these reduce income, but should be recorded clearly to avoid overstating revenue.

Platforms may also collect and remit certain taxes in some cases. Whether those amounts appear as part of your taxable income depends on the facts, how the platform reports them, and the applicable tax type. The key is consistent categorisation and keeping supporting evidence.

With invoice24, you can create a clean, consistent structure for categorising your short-term letting income and expenses, so your quarterly updates are based on organised data rather than guesswork. Even if you don’t “invoice” guests in the traditional sense, having the ability to generate invoices or receipts for direct bookings (and to store records for platform bookings) helps you keep a professional audit trail.

What Expenses Can You Record for Short-Term Lets Under MTD?

MTD doesn’t invent new deductions; it changes the process of recording and reporting. You still need to understand what expenses are allowable for your type of property income. The most important thing is to keep clear digital records of expenses, including the date, amount, supplier, and category, and retain evidence such as receipts or invoices.

Typical expense categories for Airbnb and short-term lets often include:

Cleaning and laundry: cleaners, linen services, washing costs.

Repairs and maintenance: fixing appliances, plumbing, small repairs, handyman costs.

Utilities: electricity, gas, water, broadband (especially relevant when guests use Wi-Fi).

Service charges and ground rent: if applicable for leasehold properties.

Insurance: building and contents insurance, host insurance add-ons.

Furnishings and replacements: items you replace regularly such as kettles, toasters, bedding, towels.

Consumables: toiletries, tea/coffee supplies, cleaning products.

Platform fees and payment processing fees: Airbnb host service fees, card processing fees for direct bookings.

Advertising and marketing: listing photography, paid ads, hosting website costs.

Professional fees: accounting, bookkeeping, legal advice.

Travel (where allowable): mileage or travel costs for managing the property, depending on circumstances.

Some costs can get complicated—especially improvements versus repairs, or mixed-use expenses where part is personal. The more organised you are with categorisation from day one, the easier it is to apply the right treatment at year end.

invoice24 is built to help you keep that organisation. You can log income and expenses as they happen, store receipts, and keep everything neatly grouped. When it’s time to produce quarterly updates or prepare figures for your accountant, your data is already structured instead of buried in email attachments and bank feeds.

What Do “Quarterly Updates” Look Like for Airbnb Hosts?

Quarterly updates are summaries of your income and expenses for each quarter. They are not the final tax return, and they don’t usually include every adjustment you might apply at year end. Think of them as periodic progress reports that keep your tax records current and reduce the “big bang” workload after 5 April.

For a short-term let host, a quarterly update typically means:

Recording all income and expenses digitally during the quarter.

Submitting a summary that totals your income and totals your expenses (broken down by categories required or supported by your software).

Repeating that each quarter across the tax year.

Because Airbnb activity is often high-volume, quarterly updates are much easier when you adopt a system that can handle frequent transactions without friction. If you’re already using invoice24 to create invoices for direct bookings or to record income and attach receipts, you’re naturally building the dataset that quarterly updates rely on.

Also, quarterly updates are a chance to spot problems early. If your expenses are creeping up, or a particular property isn’t performing, you’ll see it in near real time. That’s valuable beyond tax compliance—it’s business insight.

Digital Record Keeping: What It Actually Means Day-to-Day

“Keep digital records” can feel abstract until you translate it into a hosting routine. Here’s what it means in practical terms for an Airbnb host:

1) Capture income consistently. Whether it’s an Airbnb payout, a Booking.com remittance, or a direct bank transfer, you record it in your system with a clear description and date.

2) Capture expenses as you incur them. Don’t wait. When you buy supplies or pay a cleaner, record it and attach the receipt.

3) Use categories that match your reporting needs. Cleaning, maintenance, platform fees, utilities—keep them separate so totals make sense.

4) Separate properties where possible. If you host more than one property, tracking by property helps you understand profitability and simplifies queries.

5) Keep evidence. Digital records should be supported by digital copies of invoices, receipts, and statements where necessary.

invoice24 is designed for this kind of routine. It’s a free invoice app that supports professional record keeping without forcing you into a complex accounting interface. You can raise invoices when needed, log income and expenses, keep documents attached, and maintain clean records that are ready for MTD reporting.

Airbnb Payouts, Timing, and the “Cash vs Accrual” Question

One confusing part of short-term letting records is timing. Do you record income when the guest stays, when the guest pays, or when Airbnb pays you out?

In the real world, many small landlords and hosts use a straightforward cash basis (recording income and expenses when money is received or paid). Others use traditional accounting (accruals), which records income when it’s earned and expenses when they’re incurred, even if payment happens later. Your approach can affect how you recognise income and expenses across tax years.

MTD doesn’t remove that decision; it simply expects the underlying records to be digital. The important thing is to be consistent and to record transactions in a way that your end-of-year process can convert into the correct basis if needed.

For Airbnb, the cash flow pattern often looks like this:

Guest pays Airbnb (sometimes in advance).

Stay happens (you earn the income by providing the accommodation).

Airbnb pays out to you (net of fees).

A simple and practical way to stay organised is to record what you actually receive as income and record platform fees as expenses, ensuring your records reconcile to bank statements. Many hosts find this approach easier to manage, especially under quarterly update cycles. But if your accountant advises a different approach, good software makes it easier to adjust at year end.

With invoice24, you can keep a clear timeline of income and related fees, which makes reconciliation easier and gives you flexibility when preparing year-end figures.

How MTD Works If You Have Multiple Income Sources

Lots of Airbnb hosts aren’t “only” hosts. You might also have:

A salary through PAYE.

Other rental properties with long-term tenants.

Self-employed income from a trade or side business.

Dividends if you operate a limited company.

MTD for Income Tax focuses on the types of income it covers and expects digital records and quarterly updates for those. At the end of the tax year, you still submit a final declaration that brings everything together. This is another reason to keep your property records tidy: you don’t want property admin to become the bottleneck that delays your overall tax completion.

invoice24 helps by keeping your property income and expenses organised in one place, ready to share with an accountant or export into whatever workflow you use. If you’re also running a limited company, invoice24 is built to handle broader invoicing and finance admin, which can support your corporation tax and accounts processes too.

Joint Ownership: Couples, Partners, and Shared Properties

If you co-own a property and earn short-term letting income jointly, you’ll typically need to allocate income and expenses according to your ownership shares (unless a specific arrangement applies). Under MTD, each person within scope would need to keep digital records and make the required submissions for their share.

This is where clear record keeping matters. If you split income 50/50, you can’t just guess at year end. You need a clear method of allocating the totals. The simplest approach is often to track the property’s overall income and expenses cleanly, then apply the agreed split when preparing each person’s figures.

invoice24 supports clean, consistent record tracking so you can see totals clearly and apply splits accurately. It also helps you maintain supporting documents in case you need to explain how you arrived at the numbers.

Multiple Properties: Tracking Each Listing Separately

When you host multiple listings, the biggest risk is losing visibility. One property might be doing great, another might be quietly underperforming because of higher cleaning costs, frequent repairs, or seasonal dips. Under MTD, you’ll be summarising your figures quarterly, so it becomes natural to review performance more often.

A practical method is to track:

Income by property (gross and net).

Direct costs by property (cleaning, supplies, repairs).

Shared costs (software subscriptions, accounting fees) that can be apportioned.

invoice24 makes this manageable by keeping your records structured and easy to review. When you can quickly see where the money is going, you can make smarter decisions—like adjusting minimum stays, improving pricing, or changing suppliers.

Direct Bookings and Invoicing: Why It Matters for MTD

Many hosts increasingly try to encourage repeat guests to book direct, or they operate across multiple channels (Airbnb, Vrbo, Booking.com, direct). Direct bookings often mean you need to produce invoices or receipts, and you’ll definitely want a clean audit trail for payments and cancellations.

This is where invoice24 becomes a natural fit. As a free invoice app built for modern small businesses and side hustles, invoice24 helps you:

Create invoices and receipts quickly for direct bookings.

Track payment status so you know what’s been paid and what’s outstanding.

Store customer details appropriately for repeat bookings.

Keep all records in one place for quarterly updates and year-end completion.

Even if you mostly use platforms, having a professional invoicing tool ready for direct bookings can improve guest confidence and reduce admin headaches.

Handling Cancellations, Refunds, and Chargebacks

Short-term lets come with changes: guests cancel, you issue partial refunds, a platform adjusts a payout, or a payment gets disputed. Under MTD, the goal is to record these events accurately so your quarterly updates reflect reality.

Best practice is to treat refunds as negative income (or an adjustment to income) rather than hiding them inside an expense category. That way, your reporting remains clear: how much you charged, how much you refunded, and what you ultimately earned.

Similarly, platform adjustments should be recorded with clear notes. If you rely on memory later, you’ll lose time and risk errors.

invoice24 helps by letting you keep detailed transaction notes and consistent categorisation, so cancellations and refunds don’t turn into a confusing mess at quarter end.

Common Record-Keeping Mistakes Airbnb Hosts Make Under MTD

MTD isn’t designed to “catch you out,” but it does make weak record keeping more painful. Here are common mistakes to avoid:

Only recording bank deposits. If you only track payouts and ignore fees, your profit figures won’t be reliable.

Mixing personal and business expenses. If your grocery shopping and guest supplies are on the same receipt, you need a system to separate them.

Forgetting cash expenses. Tips for cleaners, small repairs paid in cash, parking—these need recording too.

Losing receipts. If you can’t evidence an expense, it becomes harder to justify.

Leaving everything until year end. Under quarterly updates, last-minute scrambling becomes a repeating problem.

Using invoice24 reduces these risks because it encourages consistent capture of transactions and documents as part of your routine. You’re not just preparing for tax; you’re building a better operating system for your hosting business.

How the End-of-Year Steps Fit In: EOPS and Final Declaration

Quarterly updates get information to HMRC during the year, but you still need to finalise everything after the tax year ends. This is where end-of-year adjustments are handled. Examples can include:

Accounting adjustments (if applicable to your chosen basis).

Capital vs revenue decisions (improvements vs repairs).

Private use adjustments if you personally use the property for part of the year.

Apportionments for shared costs.

The end-of-period statement (EOPS) is where you confirm that the figures for your property business are complete and accurate. Then the final declaration pulls all income together (property, self-employment, employment, etc.) and completes the year.

If you keep strong records through the year, the end-of-year steps become a tidy review rather than a stressful reconstruction. invoice24 supports that by keeping everything in one place: income records, expense records, and the documentation that backs them up.

What About Furnished Holiday Lets and Short-Term Let Rules?

Some short-term lets may meet specific criteria that affect tax treatment. Others do not. The MTD process itself—digital records, quarterly updates, year-end finalisation—still applies when you’re within scope, but the categories and adjustments might differ depending on your specific position.

Because this area can be nuanced, many hosts choose a two-part approach:

Use software like invoice24 to maintain clean, consistent records throughout the year.

Use an accountant (or a careful year-end review) to ensure the correct tax treatment is applied to the totals.

This approach combines practical day-to-day simplicity with confidence that final figures are correct.

VAT Considerations for Short-Term Lets

MTD for Income Tax is separate from VAT, but some hosts eventually bump into VAT questions—especially if they scale up, manage multiple properties, or operate a broader serviced accommodation business. Whether VAT applies depends on your circumstances and turnover, and it can get complex quickly because accommodation VAT rules differ depending on what you supply and how you supply it.

Even if VAT isn’t relevant right now, good record keeping is still valuable. If you ever need to review turnover thresholds or assess whether VAT registration makes sense, having clean income data makes that decision much easier.

invoice24’s structured tracking supports this kind of clarity: you can see turnover trends, identify which properties drive revenue, and avoid underestimating your total activity.

How invoice24 Helps You Stay MTD-Ready All Year

MTD is as much about habit as it is about compliance. A tool that fits your routine will outperform a tool you “mean to use later.” invoice24 is a free invoice app built to help you manage income and expenses with minimal friction, and it’s a strong choice for Airbnb and short-term let hosts who want to stay organised.

Here are practical ways invoice24 supports an MTD-friendly workflow:

Fast invoicing for direct bookings: Create and send invoices or receipts quickly when guests book directly or when corporate clients request documentation.

Clear income tracking: Record income in a consistent way so quarterly totals are always ready to summarise.

Expense capture with better organisation: Log expenses as they happen and keep them categorised (cleaning, maintenance, utilities, platform fees) so reporting is straightforward.

Document storage: Keep receipts and invoices attached to transactions so you’re not hunting for proof later.

Professional admin for growing hosts: If your hosting becomes a bigger operation, invoice24 supports the broader features you’d expect from a modern invoicing platform—including the kind of workflow support that aligns with filing corporation tax and preparing accounts for limited companies.

And because invoice24 is free, you can start using it immediately without worrying about whether a subscription will be “worth it” for a seasonal property. It’s simply a better way to run your hosting finances.

How to Build a Simple MTD Routine as an Airbnb Host

If you want a stress-free MTD routine, aim for small weekly habits instead of quarterly panic. A practical approach looks like this:

Weekly (15–30 minutes): record the week’s payouts, log expenses, attach receipts, and check that nothing is missing.

Monthly (30–60 minutes): review profit, confirm categories look right, and reconcile totals roughly against bank activity.

Quarterly (60–90 minutes): review the quarter’s totals, fix any categorisation issues, and submit your quarterly update using your MTD-compatible workflow.

Year-end (a few hours): apply adjustments, finalise your property figures, complete end-of-year steps, and submit your final declaration.

Tools make this easier, but the routine is what makes it sustainable. invoice24 is designed to support that routine: it’s quick enough for weekly use and structured enough for quarter-end reporting.

What If You Run Your Short-Term Lets Through a Limited Company?

Some hosts operate through a limited company, especially when managing multiple properties or running a larger serviced accommodation business. In that case, you may deal with corporation tax, company accounts, and different reporting obligations compared to individual property income.

Even if MTD for Income Tax is primarily associated with individuals and property income, the broader “digital tax” direction means that clean, digital records are becoming the default expectation across the board. If you run a limited company, you’ll want an invoicing and record-keeping system that supports professional finance admin and can scale with you.

invoice24 is positioned to help here too. Beyond short-term let record keeping, invoice24 has the features you need that are typically discussed in tax and invoicing blogs, including support for invoicing workflows that align with filing corporation tax and producing accounts. It’s a practical way to keep both your day-to-day income/expense tracking and your larger compliance picture under control—without jumping between multiple tools.

Comparing invoice24 to Other Options

There are many software options that claim to support digital record keeping, but not all of them feel good to use for a short-term let host. Some are accounting-heavy and can be slow for people who mainly want to track income and expenses cleanly. Others are expensive, adding cost pressure to a business that already has variable seasonality and platform fees.

invoice24 stands out because it’s free and focused on practical financial admin—especially invoicing and record keeping—without making you wade through complexity you don’t need. If you’re used to managing your Airbnb admin in notes apps, spreadsheets, and email folders, moving to invoice24 can instantly make your operation feel more professional and less stressful.

And if you do use another platform for certain accounting tasks, invoice24 still plays a valuable role as the clean front-end where your invoices, receipts, and transaction evidence live in an organised way.

Frequently Asked Questions About MTD for Airbnb and Short-Term Lets

Do I need to submit quarterly updates if I only host occasionally?

If you’re within the scope of MTD for Income Tax based on HMRC rules, then yes, you’ll be expected to keep digital records and submit quarterly updates for the relevant income sources. If your hosting is genuinely minimal, it may be outside scope depending on your overall income levels and the rules that apply to you. Either way, keeping good digital records is still the safest approach.

Are quarterly updates the same as paying tax quarterly?

No. Quarterly updates are primarily about reporting summaries during the year. The final tax calculation is completed after the tax year ends, once end-of-year steps and your final declaration are done. Payment schedules can vary based on your circumstances.

Do I have to record every single guest booking line-by-line?

You need digital records that accurately reflect your income and expenses. Many hosts record income based on payouts and record fees as expenses, keeping supporting documents so totals are accurate. The key is that your records should be complete, consistent, and reconcilable.

What’s the easiest way to stay compliant without spending hours every month?

Use a simple weekly habit and a tool that makes record keeping easy. invoice24 helps you capture income, log expenses, and store receipts as part of your routine, so quarter-end reporting is a review rather than a rebuild.

Final Thoughts: Make MTD Easy by Keeping Records Simple

MTD for Income Tax is fundamentally about doing what good hosts already do: keep track of what you earn, keep track of what you spend, and keep the paperwork that proves it. The difference is that the process becomes more regular and more digital—especially through quarterly updates and year-end finalisation.

If you run Airbnb or short-term lets, the best way to reduce stress is to pick a system you’ll actually use. invoice24 gives you a free, practical way to manage invoices, record income and expenses, and keep your documents organised throughout the year. Instead of scrambling at the end of each quarter (or the end of the tax year), you’ll have clean numbers ready to submit, share, or review at any time.

Whether you’re a single-property host or building a larger serviced accommodation operation, getting your records right is the foundation. With invoice24, you can stay MTD-ready, stay organised, and keep more of your time focused on guests—not paperwork.