Tax Advice

Dare to share: How the new sharing economy allowance could build your business

29 Mar 2016

Chancellor George Osborne has given the sharing economy a boost with a new tax allowance that could help turn your micro-business into a money spinner.

There have long been queries over the tax liability of income from sales on auction websites such as eBay or renting out a room or your property through the likes of Airbnb.

But changes in the 2016 Budget mean from April 2017 you will be able to earn £1,000 on both types of transactions before paying any tax, providing a boost for the hundreds of thousands of micro-entrepreneurs and startups gaining an income online.

Ebay On Mac

This sharing economy allowance also provides a boost for anyone wanting to start a small business.

People who make up to £1,000 from occasional jobs – such as sharing power tools, providing a lift share or selling goods they have made – will also no longer need to pay tax on that income

What is the sharing economy?

The sharing economy has come of age in recent years off the back of the popularity of peer-to-peer and crowdfunding platforms.

The sector is expected to be worth around $335 billion within the next decade.

Individuals are generating income from their own assets such as renting out a car park space or their own home while it is not in use.

Companies providing these services as taxi service Uber, house-sharing service Airbnb or car parking site JustPark, all have million pound valuations.

But even smaller businesses can take a slice of the sharing economy.

Entrepreneur On Iphone

How much could you earn from the sharing economy?

Most people have sold an old sofa or pair of trainers on auction websites such as eBay.

But it also provides opportunities for thriving micro firms.

There are more than 200,000 UK business selling on Ebay.co.uk, plus millions of private sellers, all generating an estimated £6billion of sales in the UK every year.

According to eBay’s Power 30 UK index of top sellers, traders are making up to £17million per year on the website.

Top sectors include electronics, fancy dress, car parts and fishing goods.

Gadgets

Many of the businesses were started from people’s own bedrooms and operating online removes many of the setup costs and overheads of running a firm.

One user generates £1.4million turnover a month from selling gadgets, according to the report.

The online selling allowance is separate to the property allowance.

So if selling online isn’t your passion you could start building a mini landlord empire by renting out rooms in your house or your whole property online.

Websites such as Airbnb will let you list your property and rent out to tourists, businessmen or anyone visiting the area.

You can set your own prices, but UK users report typically earning almost £3,000 a year on Airbnb.

Landlords who rent out rooms to lodgers are also getting an increased rent-a-room allowance of £7,500 from the next tax year, but this can’t be used at the same time as the £1,000 allowance.

Keir Wright-Whyte

photo

Managing Director

0207 043 4000

About the author

Originally graduating with a degree in geography from Edinburgh University, Keir claims that he was then tricked into becoming an accountant by one of the UK's top 5 accountancy practices.The deception extended to the usual training in audit and associated activities.

Keir subsequently worked in a number of advisory roles with clients including in the energy trading, pharmaceuticals and financial services sectors.

He loves working at Accounts & Legal because of the variety of work and clients, the excellent team ethos and morale, the importance placed on genuinely helping and being useful for clients and because he believes what he does matters to clients and helps the firm.

Keir's primary role is to ensure that new clients with complex businesses or needs are on-boarded in the best way and he is a "trouble shooter" both for clients and where complex issues arise internally. He also helps the accounting teams strive to improve what we do for clients, whether processes or services.

When not debiting or crediting, Keir has a penchant for fixing old buildings, skiing, surfing and cycling.

  

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