There’s now an extra incentive to make money from your home or set up your own small business thanks to two £1,000 tax-free allowances announced in last week’s Budget.
From April 2017, you’ll be able to rent out your home short-term or sell your own handcrafted products online without paying any tax as long as you earn less than £1,000 a year. The move has been dubbed the Airbnb tax break, named after the popular room-letting site. If you’re looking to make a bit of extra cash from home, these new tax breaks could give you an extra push – let’s find out how you could do it.
Tax break rules
In the past, any money you made from little enterprises like selling on eBay or doing your neighbours’ gardens would be treated as income, meaning you were expected to declare it to HMRC and pay income tax on what you’ve earned. If you were only planning to make a few hundred quid from this a year, it might seem like too much trouble to register as self-employed and pay the tax, so you could have been dissuaded from setting up your own micro-enterprise.
When the new rules come into force next April, you’ll be able to earn up to £1,000 from property income and another £1,000 off trading income, and you won’t have to pay any income tax on this. This means you’d be able to rent out a spare room in your home short-term and sell jewellery you’d made online without having to pay any tax, as long as you earn less than £1,000 a year from each source.
What’s more, you wouldn’t even have to declare income you make from property or trading that’s under £1,000, so you wouldn’t have to go through the whole process of registering as self-employed. If you earn more than the threshold, you will have to declare these earnings and pay some income tax but you’ll still be able to benefit by getting the first £1,000 tax-free.
How you could benefit
If you’re looking to make a bit of extra cash, these new tax breaks could be a real incentive to set up your own micro-enterprise. You could rent out a room in your home as office space during the day or you could even let out part of your house to holidaymakers through Airbnb. You’ll need to decide whether you want to be in the house while the renters are to dissuade them from damaging your property or if you’re prepared to leave the property empty. Find out more about how you could do this with our blog on making money from your home.
Alternatively, if you’ve not really got the space to rent out part of your home, you could still earn some money by selling products or services. To do this, you need to identify your skills. Are you really good at crafting? You could make your own clothes and sell these through eBay or Etsy. Have you got graphic design skills? You could take this up freelance for a few hours a week. Really good at DIY? Make up some flyers and see if any odd jobs need doing in your area. Whatever you decide, take a look at how to do this with our blog on working from home.
The Airbnb tax break wasn’t the only news to come out of the Budget. Find out what else could affect your finances with our Budget roundup.