Homeowners are seeking ways to combat the currently all-too-notorious rises in energy bills and the cost of living crisis that’s all over the news right now. From renting out your driveway to turning your shed into a source of income, there are plenty of ways your home could serve you in making cash.
One such possibility is for homeowners who have an unused annex or outbuilding that could provide ‘passive income’. Such an opportunity comes as new research from IW Capital found out that 39% of Brits view passive income sources as a way of complementing their income.
If you are lucky enough to have an outbuilding, keep reading to find out more.
How Much can be earned?
David Hannah, Group Chairman of Cornerstone Tax, posits that if these annex owners take necessary steps to create an Airbnb opportunity, this could open up an extra income averaging up to £6,000 a year: that’s two months paid salary for a median UK household. UK hosts on Airbnb collectively earned more than £1.5 billion in 2021, giving homeowners the decision to cap their own nightly price for the property.
Hannah goes on to state that while the demand for UK Airbnb properties is very high, and likely to continue this year due to key events like the Commonwealth Games and Jubilee, it is essential that homeowners do some serious research and preparation before opening up their properties to the public.
“We’ve all seen the rise in the cost of living and energy costs and, during the course of the pandemic, the increase in the trend of staycations. The likely restriction in consumer spending power may well encourage people to carry on holidaying in the UK. You may be facing increasing bills on your property and thinking that your unused annex or outbuilding could be used as an Airbnb for people who want to staycation in the English countryside.”
How to do it
Step one
Getting an annex or outbuilding ready to make sure it’s suitable for people to stay. That means you’re going to have to go through that building and make sure it contains all the basic necessities for living – it’s got to have somewhere to cook, somewhere to bathe, somewhere to go to the toilet and of course, somewhere to sleep. It’s got to be suitable for use as a dwelling.
More importantly, if you’re dealing with an annex, you’re probably already up to domestic insulation standards, but if you’re converting an outbuilding you’re going to need to think about insulating it. Making it green, maybe installing a log burner or some other form of heating. But ultimately, what you are going to need, above all else, is planning permission. This could take several months depending on where you are and the state of your property.
Let’s assume that you can get all that in place – what do you do next?
Step two
You need to make sure that your annex or converted out building has a separate meter, not necessarily a separate account, so that you can recover part of the costs of electricity and heating against the income that you earn from Airbnb. The important thing is to count everything that you use wholly and exclusively in that business and put it into your accounting software and claim it against your income tax – maximising the return.
Airbnb, running holiday cottages, that’s a business of holiday letting and you’re going to need to register yourselves with HMRC as having this new trade so that you can do self-assessment returns at the end of the tax year.
Step three
“When you’ve got all that sorted, you’re ready to run and you’ve got to market it. This means you have to upload it to Airbnb, you might even want to build your own website to increase the promotion. You’re ready now, it’s open and you’ve got guests booked in. It’s a chance to make a separate source of revenue which is extremely useful in these times.”
Other ways to make money
Our editor Vicky Parry says:
“We need to all be thinking outside the box a bit these days. Understandably, if you are someone that has an annex already, we recognise that you are highly likely not someone in the same amount of financial trouble as others. We have, however, observed that these price hikes have impacted a complete cross-section of society, and it’s clear that we need to be thinking creatively how to monetise what we do have. On MoneyMagpie we have so many suggestions for everyone.”
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