Tax breaks for the ‘sharing economy’ are on the way, encouraging more people to think about trying to earn a little cash on the side without leaving home.

A third of the population has at some time had a go at making money from home, and those who do earn an average £85 per month, according to research last year by Gocompare.com.

That amounts to £1000 a year – and next year anyone will be able to earn twice that amount with no reason not to declare it to the taxman.

In his budget George Osborne said from next April we will be able to earn £1000 from property rent, and £1000 from trading income, without paying tax.

It was billed as a boost for ‘self-starters’ and micro-entrepreneurs in the digital age, and is aimed at the 700,000 people who already declare home-earning activities, most commonly renting out a room or selling goods on eBay.

For those who are already earning a bit on the side but not declaring it at all, that may come as a relief – but it also acts as a reminder from your friendly taxman that income above £1000 in each area must be declared through the self-assessment system.

People who make money from letting spare rooms are already able to earn up to £7,500 tax-free under the "rent a room" allowance, which was raised last year from £4,250. The new £1000 property tax break will cover digital home rentals beyond just one room, such as whole properties and holiday homes on Airbnb.

It also covers renting out space in or around your home such as an attic or unused storage room. You can advertise for free on websites such as storenextdoor.com or storemates.co.uk. Sites such as Justpark, Parklet, and your parkingspace, allow you to rent out your driveway or parking space. Such sites claim that in popular areas it’s possible to earn £200 a month or more. The Treasury even suggests renting out your garden.

There are questions however about how the two allowances will interact. The government has indicated that the new allowance will operate in a similar way to the rent-a-room exemption where a landlord has expenses to claim, in that a landlord will need to decide which one is the most beneficial to claim – the allowance or the expenses.

Michael Steed, president of the ATT, says: “It will be difficult for the government to sell this as a simple move for micro-entrepreneurs unless it gives greater clarity about the link to the rent-a-room scheme.” He said clarity was also needed on whether the two allowances will have a similar impact on assessable income as calculated for entitlement to benefits like Universal Credit. “If the allowances create a difference between taxable income and income for benefit purposes then this could have a negative impact on the simplicity that they are supposed to provide.”

The £1000 trading allowance will be helpful for those who declutter by selling unwanted items online, but it will not be enough for everyone making money at home from trading on sites such as eBay, Gumtree and Etsy. One is six is operating as a business, the Gocompare research found, while one in 20 is making and selling craft items.

The new allowance will cover any sale of services too. The Treasury says that means for example cleaning or odd jobs, hiring out your own equipment such as power tools, as well as selling services online through sites such as TaskRabbit. The research found pet-sitting and beauty treatments such as nails or hairdressing the most common earners. Earnings from lift shares, on sites such as BlaBlaCar, will also qualify.

The third biggest earner for home entrepreneurs has been solar panels, installed to reduce energy bills and earn an income from feed-in tariffs or ‘rent a roof’ schemes, though reductions in returns have made the area less attractive than in the past.

If you rent out any part of your property, your insurer needs to know. Your premium may go up, but if you keep quiet any claim is highly likely to be turned down.

Only a quarter of people making money from their home currently declare it to HMRC, and a third say ‘it would not be worth doing’ if they had to pay tax on their earnings, the research found. The Treasury says the new regime is about “making it easier for people with low levels of property and trading income” – but says HMRC will be vigilant.

One in ten of those surveyed said that their ‘earn from home’ activities cost them more money than they made, and a fifth said that they only just broke even. Ben Wilson at Gocompare.com says: “With people spending on average 4.6 hours a week to earn £85 a month, some money-making schemes are clearly easier and more rewarding than others. Whether you decide to rent out a room or try your luck as an eBay seller, it’s important to take a bit of time to research the pros and cons of each scheme – looking at not only the potential returns, but the associated costs and other requirements.”