In March’s Budget, George Osborne announced the introduction of two new £1,000 tax-free allowances for “micro-entrepreneurs”. This relief will apply to those who earn extra income through “occasional jobs”, such as selling items through eBay, or through property-related transactions, such as letting out a spare room on Airbnb.
From April 2017, micro-entrepreneurs won’t have to declare or pay tax on the first £1,000 they earn from each source per year. The relief applies to income only, meaning expenses aren’t taken into account. Those who earn more than £1,000 gross of expenses from either source can either choose not to pay tax on the first £1,000 only instead of calculating exact expenses, or pay tax on the whole amount after deducting any relevant expenses.
The allowances will run alongside the existing Rent a Room scheme, under which you pay no tax on up £7,500 of income from renting out spare bedrooms. However, it will only apply to income generated from a separate source (for example, by renting out a driveway as well as letting out a spare room) – so you can’t get both allowances on the same income.
HMRC says that 700,000 people are set to benefit from the relief. That said, it seems likely that many people who will be affected may not have been declaring this income, or even aware that they needed to pay tax on it in the first place. So the change is probably largely symbolic – and may even make it more obvious to those earning over £1,000 that they should be declaring this income. Still, it should be a welcome simplification of the rules.