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Now you WILL be taxed on selling crafts online and renting out a room: Government quietly scraps tax breaks on ‘micro-entrepreneurs’ just days after they kick in

Millions of people who use sites such as Airbnb, eBay and Etsy will no longer be able to benefit from lower tax bills after the Government quietly scrapped two tax breaks last week.

The new rules had meant that anyone earning less than £1,000 through renting out a room or their drive, or selling goods online, would not have to pay tax.

The two tax breaks, one for property and one for trading, were first announced in the 2016 budget.

But, having just been introduced at the beginning of last month, the allowances have now been scrapped after being removed from the Finance Bill, which was passed at the end of last week.

Two £1,000 tax breaks designed for those using the sharing economy have been scrapped

Once again, anyone selling items online on a regular basis will have to tell the taxman or fill out a tax return every year, or else risk being fined (see the box below).

These digital tax breaks were designed for helping those working in the sharing economy.

Called ‘micro-entrepreneurs’, these include people who rent out their homes or spare rooms through websites such as Airbnb and those selling homemade crafts on websites like Etsy or eBay.

The measures were supposed to be introduced on 6 April this year but both tax breaks were taken out of the Finance Bill, along with a host of other plans.

The move has not been widely publicised and there was no official announcement from the Treasury to say the tax breaks had been removed.

But a spokesperson said: ‘We can’t speculate on what will happen in the future, though I can confirm that the measures have been dropped from the bill.’

The tax breaks were split into income and property. The income relief was for those selling online, such as those with a marketplace on Etsy selling their own crafts, while the property relief was for those renting out parts of their home – such as a parking space or garage.

These were separate to the current rent-a-room tax relief scheme, which lets people earn up to £7,500 a year tax free when letting out furnished accommodation, which remains unaffected.

The tax breaks were meant to help those using the sharing economy to lower their bills

When it was first announced, the then Chancellor, George Osborne, said the existing tax laws were ‘daunting and complex’ for those trying to make money online.

Jane Ellison, financial secretary to the Treasury, said when the changes to the bill were made: ‘The bill is progressing on the basis of consensus and therefore, at the request of the Opposition, we are not proceeding with a number of clauses.

‘However, there has been no policy change. These provisions will make a significant contribution to the public finances, and the Government will legislate for the remaining provisions at the earliest opportunity, at the start of the new Parliament.’

A host of other measures were also dropped last week.

Plans announced just last month to cut the tax-free dividend allowance from £10,000 to £4,000 and cuts to the money purchase annual allowance were scrapped, along with a proposed ban on pension cold calling.

A digital tax hit which was set to target small firms and the self employed was also removed from the bill.

The bill has been stripped right back in order to be passed before the snap general election on June 8th. The Government argued this was the only way to pass the bill before parliament adjourns ahead of June’s election.