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The gig economy and taxation: what you need to know

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29/09/2017
Renting your home on Airbnb and putting up the neighbour's shelves for a fee? Make sure you are reporting your income correctly to the tax authorities.

There are an estimated five million people working in the ‘gig’ economy in the UK, and many more who rent out rooms on Airbnb or sell things on eBay. If you’re one of them, make sure you are declaring what you need to the tax authorities, or risk a hefty bill at a later date.

Airbnb

In general, money you earn from hosting is considered to be rental income and will be subject to tax. However, it depends how much you earn.  At the moment, you can claim rent-a-room relief. From 6 April 2016, this is £7,500 (up from £4,250 previously). Below this level you don’t need to declare your earnings to HMRC or complete a tax return.

Above this level, you will need to declare and pay tax on the proceeds. The amount you pay will depend on your other earnings. If you have a salary and you pay tax at 40%, the extra amount will be payable at 40%, for example. However this is under consultation, so watch out for changes.

Other rentals

There are plenty of ways to make money from your home, from renting out your garage, to offering it as a film location. Income received is deemed to be ‘income from land and property’ for taxation purposes. You can set off costs such as advertising, or higher insurance premiums to give an overall profit figure, which will need to be declared on a tax return. Again, you will pay tax at your marginal rate – i.e. the top rate of tax you are currently paying.

If you are renting other items – such as a classic car – this is considered income from self-employment.

Selling on eBay

There is a key difference between selling occasional personal items on eBay and selling for profit. HMRC has devised a nine-point plan – the so-called ‘badges of trade’ to judge whether what you make is taxable. This includes looking at the size of your turnover, the extent to which you are both buying and selling, and whether you are clearly specialising in one particular commodity. It is all about determining whether you are running a business or clearing the shed. If you are deemed to be running a business, you will have to declare it to HMRC as trading profits (though you will also be able to claim expenses).

Selling your services

Again, there is a difference between a friend paying you £20 to put up shelves, and offering your services on a site such as TaskRabbit or doing shifts as a Deliveroo driver. For the latter, the money you receive is considered as earnings from self-employment and needs to be declared to HMRC. Plans to bring in a £1,000 gig economy allowance were scrapped in the Finance Bill, so even relatively small amounts need to be declared.

There is also a risk that if you do enough work for one company you will be considered to be employed. This brings certain rights, but may not give you the flexibility you were looking for.

Research by Citizens Advice has suggested that as many as 460,000 people could be falsely classified as self-employed and last October Uber drivers in the UK won the right to be classed as workers rather than independent contractors.

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