More and more people are monetising their underused assets through sharing economy platforms, from spare rooms and cars to belongings. In fact, the UK sharing economy alone is set to be worth £140bn/year by 2025. The below information may be helpful for those earning an income through the sharing economy in the 2017-18 tax year.
Is My Sharing Economy Income Taxable?
By law, you’re obliged to pay taxes on any income provided by the following:
- Renting out your home to tourists (e.g. Airbnb)
- Renting out your property for business purposes (e.g. Vrumi)
- Gig work: cleaning, odd jobs, courier delivery services (e.g. Uber)
- Renting out your personal equipment (e.g. Fat Lama)
As advised by HMRC, taxes are payable whether or not this income provides your main job or business.
Should I Pay Tax On My Fat Lama Earnings?
The first £1000/year you earn as a lender on Fat Lama is 100% tax-free, thanks to the sharing economy tax allowance (see below) which HMRC brought in for the 2017-18 tax year onwards. Beyond this amount, you are required to pay income tax on all earnings through the platform.
What’s The Sharing Economy Tax Allowance?
As of the 2017-18 tax year, two new sharing economy tax allowances are in place which will benefit those earning an income via sharing economy platforms:
- £1000 allowance for ‘property income’
- £1000 allowance for ‘trading income’ (This covers your Fat Lama earnings!)
By trading income, certain miscellaneous income from providing assets or services These are separate to the basic individual tax allowance which, for the 2017-18 tax year, amounts to £11,500. In the words of HMRC, the allowances are designed to ‘to provide simplicity and certainty regarding income tax obligations on small amounts of income from activities such as room rentals or online selling.’
Who Does It Affect?
700,000 individuals will, according to HMRC, benefit from the allowance. Given the forecasted growth of the UK sharing economy, expect this number to rise dramatically in the coming years.
How Much Is It Costing The Treasury?
The new measure is expected to result in £15m of tax lost to the Exchequer in 2017-18, rising to £235m in 2018-19 and then totalling around £200m lost for each of the next two tax years.
You needn’t pay Income Tax on earnings from occasionally selling personal possessions online, but you might need to pay Capital Gains Tax. Similarly, you usually don’t pay Income Tax on anything you do where you’re simply covering your costs: eg. car pooling.
How Do I Pay?
If you’ve worked out that you owe tax on income from online P2P networks, you will need to declare it via a Self-Assessment. Head to HMRC or try their Income Tax Helpline (0300 200 3300) for clarification.