NatCen carried out three surveys polling a total of more than 16,000 individuals to examine the size of the sharing economy, who was involved and their attitudes and experience of tax.

Their research suggests 5.3m individuals – which it classed as ‘providers’ - participate in the sharing economy. They are predominantly young and living in urban areas, with the majority (73%) earning a gross personal annual income of less than £40,000. The annual mean individual income providers earned is approximately £1,700.

The age groups most commonly earning above £11,000 were 25-34 and 35-44 (6 %), while those aged over 45 were most likely to have earned less than £250. This may suggest that older people are engaging in the sharing economy as more of a hobby or income supplement, while younger people are more dependent on the sharing economy as source of income.

For 15% of respondents sharing economy activities generated their main source of income, whereas for over three quarters (77%) it did not.

The most common types of sharing economy activity were buying items to resell, mentioned by 44% of providers, followed by selling crafts (22%), and renting out space (19%). The study also included those who hired out their cars for passenger or parcel delivery, and those who invested in peer-to-peer lending sites.

Those who described their sharing economy activities as their main source of income were most likely to be offering a delivery service (43%), renting out space (41%), or renting out a vehicle (41%).

Individuals were most frequently (45% of respondents) earning a total income of less than £250 a year, typically from buying to resell (58% of those earned less than £250) and selling crafts (46%).

Activities that in more cases generated the highest incomes (over £11,000) were renting out space and performing short-term jobs.

Just over a third (35%) of providers had notified or planned to notify HMRC about their sharing economy income. Nearly half (46%) said that they earn less than what needs to be reported. Another 8% said they had not notified or did not plan to notify HMRC for another reason. The proportion of those who had not notified HMRC for another reason was largest amongst those with higher gross personal incomes (between £50,000 and £69,999).

Those providing transport or renting out a vehicle had usually notified or planned to notify HMRC of their income (89% and 82% respectively). In comparison, only 30% of those buying to resell had notified HMRC.

Tax reporting

Over half (54%) of providers did not see their sharing economy income as liable for tax. The majority of those with a total annual income under £10,000 per year (72%) thought they were not liable to pay tax on the sharing economy income, whilst just over a third (37%) thought so in the highest income category, earning £70,000 and over.

However, the study also found that 11% of providers earning over £11,000 through their sharing economy incomes alone said they earned less than what they believe needs to be reported.

In addition, smaller but still sizeable proportions of those with gross personal incomes of over £50,000 said they earned less from their sharing economy activities than what they believe needs to be reported.

The research showed that 16% of those with an annual gross personal income of £70,000 or more and 18% of those earning £50,000 to £69,999 said they had not notified HMRC.

The study notes: ‘While it is possible in both cases that this income is covered by the allowances for savings and rental income where applicable, this suggests that some of these respondents may not have complied with their tax obligations.’

Amongst the case illustrations provided in the study is one regarding a participant who worked at an accountancy firm had been renting out his room while on holiday, providing consultancy work and renting out his vehicle for 1-3 years. He earned £3,500 through his sharing economy activities on top of his income of £75,000.

According to the research, he did not think his sharing economy income was or should be liable to tax. He understood he would not have to pay tax for selling second hand goods online and saw other sharing economy activities in the same way. He said he found tax rules difficult to understand and said the platforms he uses do not explain tax obligations.

Providers were asked about their attitudes towards platforms automatically sharing earnings information with HMRC. While 51% were comfortable with the idea, based on the perceived convenience, over a third (35%) were not. Nearly half (47%) of those who saw their sharing economyactivities as just an extra way of making money were uncomfortable with the idea, on the basis it would be too invasive and could compromise confidentiality of earnings from HMRC, particularly small amounts; as well as concerns that platforms may introduce fees to cover additional costs.

Almost twice as many individuals (21%) described themselves as being employees in relation to their sharing economy activities rather than self employed (12%). 

Most of the respondents did not use the services of an accountant and reported mixed views on how helpful HMRC guidance was on the tax status of sharing economy activities. The majority (57%) did not receive any assistance in record-keeping, while 17% of providers said they did not keep any records on their income.

Those who felt the tax rules were complicated gave a number of reasons for their view. One key issue was combining PAYE work with self-employed work. Participants felt this added an extra level of difficulty to understanding how much tax they should pay, especially if the self-employed work provided a variable level of income.

Research and analysis Sharing Economy: User characteristics and tax reporting behaviour is here.

Report by Pat Sweet