What I think about the £2000 sharing economy tax break
From April 2017, there will be two new tax-free £1,000 allowances – one for selling goods or providing services, and one income from property you own. 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 no longer need to pay tax on that income. In the same way, the first £1,000 of income from property – such as renting a driveway or loft storage – will be tax free (taken from here)
Last year I set myself a challenge to earn £10,000 in a year without getting a job. My idea was to make money through sharing economy activities e.g. renting out my car, my driveway, my stuff, my spare space for storage or parking, renting out my spare room and so on. I was sold on the idea of it being an eco way to earn money because instead of stuff and space going to waste between uses, it could be used all the time and maybe reduce the need for new stuff to be made / bought/ built. I hoped it would be easy, like we found renting out part of our garage easy – just fitting into my lifestyle and not being too much extra work.
I quickly found however that actually ‘sharing’ wasn’t quite the right description and that really what was involved in each activity was setting up a peer to peer rental micro-business. Far from just fitting in with my lifestyle, the amount of work, hassle and initial investment involved in some of these activities e.g. renting my stuff or my car just didn’t seem worth it for the following reasons:
- Insurance. Getting insurance to cover a range of sharing type activities in your home is difficult but not impossible. What it does mean though is that the insurance becomes bespoke and very expensive. The level of cover of the home, buildings and contents insurance being offered at great expense may also not be as good as your current insurance.
- Legal issues. How do you make sure with these varied activities that you are complying with all the relevant legislation and that you are keeping up to date with it? Is it worth the hassle for something that isn’t going to bring in much money like for example if I decided to offer a few folding chairs for rental? I have no idea what my legal responsibilities are surrounding this and I doubt I would make much money renting them out.
- Hassle. Some of these things are a lot more hassle than others. There is a difference between meeting with one person once or twice a year to deal with a garage rental for long term storage and co-ordinating pick up and drop off with different people every weekend for renting out folding chairs for example. Also although some of the websites facilitating these micro-businesses have taken off, many of them are still in their infancy and this means that they aren’t going to get you any customers by themselves (or at least not very quickly). I listed my car for rental on one site and have had zero interest. I found a site where I could offer my stuff for rent, but there is currently nothing listed on it for my area. It took a few months before we got a customer who wanted to rent our garage for storage. The seed of the idea is there, but unless you get lucky the hard work of advertising your listing on these sites is down to you.
- Business sense. It doesn’t make business sense renting out a random hodgepodge of things! Have you ever thought to yourself, you know what I’ve got a great idea for a business – I’m going to offer various things for rent. The main criteria for deciding what to rent out is that they are things or spaces I already have and they are currently underused. I’m not going to do any research into what is actually in demand for rent in my area? I doubt it!
- Tax. You do need to pay tax on these activities, and you may need to start filling in a tax return (if you don’t already) which means you earn less money and if you are only earning small amounts of money anyway this can be off putting. The government £2000 ‘sharing’ economy tax break does make it more appealing though and there is also rent-a room relief which increases from £4,250 to £7,500 per year from 6th April 2016 (read more here). This does make renting out a spare room potentially a really good extra source of tax free income.
I also think that the people who will be successful with making money from these sites will either get lucky or will approach their activities like any normal business, doing research into their market, selecting only the most appropriate goods and services to rent, presenting them in a pleasing way, providing good customer service, making sure they are dealing with any relevant legal requirements, have insurance and policies to deal with any potential problems and so on. I don’t think many people will think about having a go at it all, like I was 🙂
It will be really interesting to see if this tax break is enough of a push to get a few more people on the sharing economy bandwagon and to get those currently under populated sites going and at what point I will decide that it might be worth trying to rent out a few folding chairs!
Disclaimer – this blog post does not constitute advice of any kind, it is just my personal opinion provided for entertainment purposes only.