Two tax breaks for online sellers and room renters worth £1,000 a year each are set to be introduced after the summer, the Government has announced.

The tax-free allowances are aimed at "micro-entrepreneurs", including those making extra cash selling on eBay, from Airbnb rentals or through odd jobs - and are likely to apply retrospectively.

They were supposed to have been part of the Finance Bill 2017, but were quietly dropped by the Government as it rushed to get as much legislation as possible through Parliament before June's snap election. See our MSE Government drops £1,000 tax breaks for online sellers and room renters - for now News story.

Martin Lewis
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What are the tax breaks?

Here's how the proposed allowances looked before they were dropped:

  • One allowance applies to those who earn extra income through "occasional jobs", eg, activities like selling items online, giving lifts in their car or sharing power tools.
  • A second allowance applies to property-related income, for example through renting out a room, space on a driveway or storage in a loft.

Other planned changes now back in the new bill include reducing tax-free allowances for money made from dividend income from £5,000 to £2,000, and cutting annual pension pot contributions once accessed for cash, from £10,000 to £4,000 a year.

What happens next?

The Government has said it wants to introduce a finance bill as soon as possible after the summer recess containing all the parts that were dropped before the election.

It has said any policies which were supposed to apply from April this year, such as the £1,000 tax-free allowances, will be backdated.

The Government will, however, have to get the new bill through Parliament.

What about the 'Rent a Room' scheme?

If you're currently renting out a room in your home, there's also the Rent a Room scheme, which offers a £7,500 tax-free allowance on money earned from renting out a room. However, the Government did say in the March 2017 Budget that it plans to consult on proposals to "redesign" the scheme, "to ensure it is better targeted to support longer-term lettings".

For tips on how to make extra cash on the side, see our Boost Your Income, eBay Selling, Facebook Selling and Rent Your Parking Space guides.

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