Tax dodge of the week: Tax savings for “micro-entrepreneurs”

In March's Budget, George Osborneannounced the introduction of twonew £1,000 tax-free allowances for"micro-entrepreneurs". This relief willapply to those who earn extra incomethrough "occasional jobs", such asselling items through eBay, or throughproperty-related transactions, suchas letting out a spare room on Airbnb.

From April 2017, micro-entrepreneurswon't have to declare or pay tax onthe first £1,000 they earn from eachsource per year. The relief applies toincome only, meaning expenses aren'ttaken into account. Those who earnmore than £1,000 gross of expensesfrom either source can either choosenot to pay tax on the first £1,000 onlyinstead of calculating exact expenses,or pay tax on the whole amount afterdeducting any relevant expenses.

The allowances will run alongside theexisting Rent a Room scheme, underwhich you pay no tax on up £7,500of income from renting out sparebedrooms. However, it will only applyto income generated from a separatesource (for example, by renting outa driveway as well as letting out aspare room) so you can't get bothallowances on the same income.

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HMRC says that 700,000 people areset to benefit from the relief. That said,it seems likely that many people whowill be affected may not have beendeclaring this income, or even awarethat they needed to pay tax on it in thefirst place. So the change is probablylargely symbolic and may even makeit more obvious to those earning over£1,000 that they should be declaringthis income. Still, it should be awelcome simplification of the rules.