Plenty of warnings have been posted about legal crackdowns (or, to satisfied customers, repression) of the Aribnb rental operations. London is different, as this report from The Guardian notes:
http://www.theguardian.com/travel/20...ised-in-london

"Under the updated law, homeowners will be able to let out their house, flat or spare rooms for up to three months a year"

I cannot see this being policed

Our London airbnb host explained that they could rent out a room in their apartment without paying taxes up to a certain amount. Beyond that amount, the earnings on the rental were subject to taxation.

yeah, lots of people selling illegal things have "satisfied customers", like drug dealers. That doesn't mean it's okay. Nor is running businesses without licenses and illegally not paying taxes okay. I don't support any business that does that.

I think it's like a lot of things, policing is mainly done through complaints. So if a neighbor saw someone violating that and renting their place out to random strangers many months of the year, they would no doubt complain if they didn't like it.

Michael, there is no base limit to room rental taxation in the UK as described by your host, he was just avoiding paying his due. Like Cafe Nero, like Starbucks etc etc

What worries me more is the security and fire protection that is avoided by renting rooms under the counter like this.

A couple of years back London had a bad fire in a block of flats and the landlord had illegally split up the properties to get more people in while blocking fire exits etc. Not a nice way to go.

The other potential problem if you're renting illegally is whether you'd be covered by insurance in the event of theft, fire etc. I'd guess that most Insurers will refuse to pay out.