You'll Soon Be Able To Make Up To £8,500 Tax-Free By Renting Out Your Home Online
The chancellor introduced two new allowances for the sharing economy on Wednesday: one for those who rent our their homes online, the other for people who sell items through online marketplaces.
People who use Airbnb, the service that allows you to rent out your property online, have just been given a second tax break within 12 months by chancellor George Osborne, which could see them earn as much as £8,500 a year without paying any tax.
In Wednesday's Budget statement, Osborne announced a new £1,000 tax-free allowance for people who rent out their home online, one of two new measures on the sharing economy.
The subsidy, which would be extended to individuals who rent our their driveway or let out a room in their main home for use as an office in the daytime, would come into force from April 2017.
The new subsidy comes on top of another measure revealed by BuzzFeed News last July, which will see the so-called "rent-a-room" allowance – which applies to people who rent out rooms in their main residence – increased from £4,250 to £7,500 every year, starting from April 2016.
This means Airbnb users could earn £7,500 from renting out their home – in addition to another £1,000 from renting out their driveway or home office – before they have to pay any tax. The homesharing website has already updated its website to inform its users about the new allowance. A spokesperson for the website welcomed the new measure.
“We’re going to help the new world of micro-entrepreneurs who sell services online or rent out their homes through the internet," Osborne said.
"Our tax system should be helping these people so I’m introducing two new tax-free allowances each worth £1,000 a year, for both trading and property income. There will be no forms to fill in, no tax to pay – it’s a tax break for the digital age and at least half a million people will benefit.”
While Uber drivers will be eligible for the allowance, a Treasury spokesperson told BuzzFeed News they didn't expect them to make use of it. That's because people who use the subsidy won't be able to deduct expenses for the income. This is especially important for Uber drivers, who are currently able to deduct expensive items such as petrol, road tax, and motor servicing.
The Treasury estimates that 700,000 people, of whom 75% are on the basic tax rate, will be affected by the new allowance. By 2018/19, it is expected to cost the government about £200 million a year.
"From our perspective, we're pleased that the government recognises that homesharing is something different and is introducing specific rules and regulations for people taking part in the sharing economy," a spokesperson told BuzzFeed News. "The UK government is really leading the way on this. This is progressive legislation that is easy and clear for people to follow."
The news was also celebrated by Debbie Wosskow, who heads up the Sharing Economy UK trade body and has called on the government to introduce such a tax-free allowance.
The chancellor also introduced a second tax-free allowance of £1,000 for people who trade online. This would affect those who use online marketplaces such as eBay and Amazon's community market – as well as websites such as TaskRabbit, an on-demand platform where people set their own hourly rates for carrying out tasks from installing a television to delivering doughnuts.