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The new tax year which began last month and brought with it a series of useful tax-free allowances that you may not currently be aware of, including the Government’s new trading and property allowances.
Under the new trading allowance, anyone is able to earn up to £1,000 a year from a personal hobby or start-up business before income must be declared to HM Revenue & Customs (HMRC) via a self-assessment tax return.
This exemption applies to people who sell goods via online marketplaces such as eBay and also those who provide ‘casual services’ such as gardening or babysitting.
New self-employed microbusinesses can also take advantage of the new rules, but will be expected to pay income tax on their full profits once the £1,000 threshold has been exceeded.
Furthermore, under what is known as ‘rent-a-room’ relief, homeowners are now entitled to earn up to £7,500 a year from letting out furnished accommodation in their home. However, those who rent out rooms via short-term letting websites such as Airbnb could face a shock in coming months, as the Government is reportedly considering changing the rules so that such lettings are not entitled to the tax break.
Homeowners can also benefit from the new property allowance – which enables people to earn up to £1,000 tax-free by renting out the likes of driveways, parking spaces and loft storage to other people.
The property allowance also applies to Airbnb lettings, but an HMRC spokesperson has warned: “If someone is using the rent-a-room relief to let their home, they will only be able to use the new property and trading allowances for a separate source of income”.
They added: “They can use rent-a-room relief for letting out a furnished room and the new property allowance for renting out their driveway for a parking space. Or, they can use rent-a-room relief for letting out a room and the new trading allowance for doing some handyman work”.
Put simply, in order to take advantage of trading allowance, property allowance and rent-a-room relief in a single tax year, people will need to have three separate money-generating ventures.