British sharing economy workers' £2,000 tax break

The Chancellor, George Osborne, yesterday introduced two new tax allowances for Britons making money via the sharing economy: one for those who rent out their homes online via Airbnb or similar property sharing platforms, the other for people who sell items through online marketplaces such as eBay. The new allowances will mean that, from April 2017, individuals with property or trading income do not have to declare or pay tax on the first £1,000 they earn from each source per year. If they earn more than that amount, they will have to declare the earnings, but can still benefit by deducting the allowance first. Debbie Wosskow, the founding chair of Sharing Economy UK (SEUK), said: “This is a colossal win for Britain…This demonstrates the UK truly is the home of the sharing economy and leading the global stage in this space.”

Online merchants and short-term landlords were given a gift in the budget, with two new £1,000 tax-free allowances offered on income from those sources.

Intended to boost the number of “micro-entrepreneurs” who make small amounts of money online, the tax breaks were introduced by the chancellor, George Osborne, with specific reference to the online marketplace eBay and the short-term lettings site Airbnb.

The new allowances will mean that, from April 2017, individuals with property or trading income won’t need to declare or pay tax on the first £1,000 they earn from each source per year. If they earn more than that amount, they will still have to declare the earnings, but can benefit by deducting the allowance first.

Airbnb welcomed the allowance, with a spokesperson saying: “This is good news for the growing number of Airbnb hosts in the UK who are sharing their homes, earning a little extra money to pay the bills and bringing new economic benefits to their communities.

“We applaud the government for supporting hosts and progressive business models across the country; their leadership on this important issue is an example to the world.”

The Treasury notes that “the rapid growth of the digital and sharing economy means it is becoming easier for more and more people to become ‘micro-entrepreneurs’. However, for those making only small amounts of income from trading or property, the current tax rules can seem daunting or complex.”

Both tax breaks are expected to cost a total of £235m a year by 2018. Despite the digital focus of their announcement, neither is explicitly targeted at online businesses, instead being generally available to self-employed people with trading or property income.

Debbie Wosskow, the founding chair of Sharing Economy UK (SEUK), said: “This is a colossal win for Britain. We are the first in the world to introduce a sharing economy allowance that allows individuals to earn up to £2,000 tax free. This demonstrates the UK truly is the home of the sharing economy and leading the global stage in this space.

“The trade body, Sharing Economy UK, has championed tax breaks such as this for some time. Consumers need to be able to use sharing economy platforms such as Airbnb and TaskRabbit to top up their income without the fear that they are breaking the rules.”

It’s the second tax break in a row for Airbnb landlords, who were also offered an increase in the “rent-a-room” allowance in the July 2015 budget. That allowance, which rose from £4,250 to £7,500 a year, applies to landlords who rent out a spare room in their house.

But some landlords may perceive the Chancellor sending mixed messages through the taxation system. The £1,000 tax free allowance on property income will be cancelled out for many by the 2015 budget’s cut in tax relief from 40% to 20%, which is also due to be introduced in April 2017.

Although Osborne appears keen to distinguish between buy-to-let landlords and Airbnb hosts, in practice the two may be more entwined than the chancellor would like to admit. Data from Inside Airbnb, which collates listings on the site, suggests that more than half of the listings in London are for whole houses, rather than private or shared rooms. Of those 13,331 listings, 40.8% are from hosts who have more than one listing on the site, suggesting that they are buy-to-let landlords with multiple homes owned exclusively for rental purposes.

More than three-quarters of the whole-home listings are available for rent on the site for more than 90 days a year. That period is the limit that landlords are allowed to rent for without applying for planning permission from their local authority, and another guide to whether or not the home is a buy-to-let rental.