Nowadays, it seems like everyone is finding ways of making a little bit of money on the side to help with the increasing costs of living. From selling old clothes on Vinted, to mowing your neighbours lawn or even renting out a spare property on AirBnB, there are plenty of ways to supplement your income with a side hustle- but what are the tax implications of this and how are HMRC responding?
The growth of side-hustles has inevitably found itself under HMRC’s microscope as they examine the tax implications of people earning more money. As more individuals venture into the gig economy and hustle to earn a bit of money on the side, HMRC is taking further steps to ensure that all earnings are transparently reported through a more rigorous approach to tax regulations.
How are HMRC taxing side-hustles?
Ultimately, HMRC’s goal is to ensure that they’re able to reduce the risk of tax evasion by preventing people from withholding or not declaring sources of income.
Since side-hustles are a lot more informal than traditional types of income, HMRC have introduced some new rules that apply to side-hustlers and mean that they have to report the additional income if it is over the ‘Trading Allowance’ threshold (more on that to come).
As of 1st January 2024, digital platforms facilitating side hustles, including Airbnb, Etsy, Deliveroo, Upwork, Fiverr, and Uber, will be mandated to share user details, including bank account information, with HMRC.
Who do the new rules affect?
It’s worth starting by saying that if you’re genuinely selling your own possessions on Vinted, it’s unlikely you will need to declare your additional earnings and pay tax on them.
The new rules only affect those earning more than £1,000 (before deducting expenses) through gig economy platforms. You’ll now need to declare and pay Income Tax on the amount over the threshold.
If you’re buying things for the sake of selling them at a profit on Vinted, or regularly renting out your spare property for example, then you’re likely going to be classed as ‘trading’ and might owe tax on what you make.
If you fall into this category, it is crucial that you register for Self-Assessment and accurately report your income to avoid hefty penalties and fines.
If you’re uncertain, you can check HMRC’s online calculator to work out if you need to tell it about income made from online sales.
How will HMRC enforce new tax rules for side hustles?
HMRC is investing £39.9 million to crack down on individuals who fail to report their side hustle income accurately. A specialist team of 24 experts will be dedicated to identifying discrepancies between income reported from digital platforms and tax returns. Tax investigations will be launched where necessary.
Stay on the right side of HMRC with Nordens
Staying informed and proactive is key in the often-evolving tax environment that we find ourselves in. If navigating these changes seems challenging, Nordens are here to help with all of your needs from your everyday accounting to Advisory, Tax, and more! With expert advice and tailored solutions, we ensure you’re always on the right side of tax regulations. Whatever you need guidance or assistance with, we have the knowledge and expertise to support you.
Contact us today at 0208 530 0720 or fill out our contact form to schedule a consultation.
