The sharing economy will result in “chaos” for taxpayers, experts warn, as it will lead to mass confusion that will send the number of late tax returns above one million for the first time this year.
Experts say that a significant number of new and inexperienced self-employed workers do not know that the sharing economy tax break is only effective from 2017.
The tax break will be broken into two £1,000 tax-free allowances – one for selling goods or providing services, and the other for income from property.
This means that many taxpayers using sites such as AirBnB and eBay will not be entitled to the tax break this year, and will be expected to pay tax on all of their earnings by filing an annual return.
Taxpayers not declaring income through self-assessments face hefty fines of up to 100 per cent of the tax owed, as well as a flat £100 fine for failing to file a tax return by 31 January 2017, experts say.
They suggest that up to one million people could be hit by fines for late returns in 2016.
Last year, a survey found that around 80,000 part-time landlords earned additional income by letting their home through AirBnB alone.