Do you have an Etsy shop for your crafty products?

Do you rent your spare room via Airbnb or a similar platform?

Maybe you sell second-hand products on eBay?

If you’ve answered “yes”, you have a side hustle! You’re in good company. With the recent cost of living challenges, lots of people have created a side hustle. It can be a fun way of earning extra cash!

January 2024 sees new reporting rules for side hustles. Please don’t worry! There are no new taxes involved – and no plans to introduce any tax changes. The only update is the new reporting rules that online marketplaces must now comply with. Individual traders do not need to act unless they are underreporting or not declaring income (over £1,000) to HMRC.

The new rules mean that digital platforms are obliged to provide HMRC with sellers’ financial information, including bank account details and number of transactions. The sellers involved are those who achieve an income of more than £1,700 or over 30 transactions.

As a seller, you can earn up to £1,000 a year of gross income before declaring it to HMRC. This means that many online sellers don’t need to worry about taking action. Tax liability is only incurred if your income from all streams totals more than your personal allowance value, currently £12,570.

side hustle selling onlineHMRC’s goal is to target people who earn additional income by trading online. Selling unwanted personal possessions is unlikely to be classed as trading. However, individuals who are buying or making things with a view to selling them for a profit are likely to be trading. The rules also apply to freelancers (using sites such as Fiverr and Upwork), those offering short-term property rental (including Airbnb) and delivery drivers working through food delivery apps (such as Deliveroo and Uber Eats).

Please be reassured that you are NOT affected if you:

  • earn less than £1,700 via any single digital platform (although all combined income should be declared if it exceeds £1,000 or adds to other income streams to exceed your personal allowance), and
  • currently report your income via a tax return, as this process already captures any online trading income.

“The rules will make it easier for sellers on these platforms to comply [with tax laws] and will help HMRC to detect and tackle tax evasion when they do not,” said a spokesperson from HMRC.

Emily Bridges of re:accounts Chartered Accountants in Stevenage adds: “If someone is emptying their wardrobe of old designer clothes, they could make higher sales than someone who is trading. We need to assess, through HMRC’s eyes, whether the activity involved is commercial trading or simply a way for someone to earn a bit of extra money.”

Do you think the new reporting rules affect you? Talk to the friendly tax experts at re:accounts – we love to translate stuffy tax speak and ensure you don’t pay a penny more tax than you need to. Let’s have an initial discussion.