We separate truth from fiction with the brand new guidelines for aspect hustles

In the event you promote your previous garments on Vinted or eBay, hire out your driveway or a spare room, or receives a commission for canine strolling or cat sitting, you may be just a little spooked by lots of people referring to a brand new “aspect hustle tax” that got here in firstly of January 2024. 

Is that this one thing it is advisable to fear about? We’ve divided truth from fiction in the case of incomes cash with digital platforms. 

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Fiction: The federal government have launched a brand new tax for side-hustles

The necessary truth to emphasize is that there isn’t a brand new tax on aspect hustles. The tax is strictly as earlier than. You may nonetheless earn as much as £1,000 in a side-hustle tax-free with out having to let HMRC know, due to a “buying and selling allowance”.

When you earn greater than £1,000 in a tax yr, it is advisable to let HMRC know and file a self-assessment tax return. You may not need to pay tax in case your bills, together with platform charges, imply that your revenue stays beneath £1,000. 

Reality: There are new guidelines for reporting knowledge

As of 31 January 2025, digital platforms that permit folks to make just a little more money on the aspect are required to report info to HMRC. Plenty of these platforms began doing this in 2024 already.

Beforehand, HMRC might ask for this info from UK-based apps when it wanted it. It’s now signed up for one thing known as the Organisation for Financial Co-operation and Growth (OECD) guidelines, which permits it to get the info from overseas-based firms and automates the method. 

That is designed to clamp down on tax-dodgers, these incomes an excessive amount of cash in revenue with out paying tax. It’s not meant to pressure you to pay tax whenever you promote undesirable garments in your wardrobe. Plenty of customers of those websites assume that there’s a brand new tax on aspect hustles.

Once more, that is the one factor that’s modified – there isn’t a brand new tax or an intention to tax these incomes inside the buying and selling allowance.  

As a result of HMRC can have extra info on what you possibly can be incomes, you’ll have to be sure you know the foundations and that you just’re on prime of any tax you may have to pay, in any other case you possibly can be in for a nasty shock down the road. 

What are classed as digital platforms?

On this case, a digital platform is an app or web site that connects you to consumers of your objects or companies, permitting you to become profitable – this consists of Vinted, Amazon, Etsy, eBay, Uber and Airbnb. 

Fiction: My knowledge goes to be mechanically reported to HMRC

Not essentially. There’s a €2,000 or 30 merchandise threshold for promoting objects on-line. In the event you promote lower than this, HMRC received’t be notified. 

In the event you present a service, like meals supply or childcare, then it’ll be reported regardless. 

Reality: You may earn as much as £1,000 with out reporting to HMRC

As we talked about earlier than, you possibly can earn as much as £1,000 in a tax yr (April 6 to April 5) with out having to declare something to HMRC. 

That is in whole, not per aspect hustle. So for those who’re working full time, delivering with Uber and promoting handmade items on Etsy then no matter you make on Etsy and Uber must be lower than £1,000 mixed to be beneath the buying and selling allowance. 

As well as, if any of the digital platforms you employ cost a charge in your earnings, this doesn’t come off your earnings – it’s what your prospects are charged, not what you see in your checking account. 

If earnings are beneath £1,000 then you definitely don’t have to register for self-assessment or report your earnings, but it surely’s price protecting information of your gross sales in case HMRC desires to see them. 

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Fiction: If I promote my previous possessions, I’ll need to pay tax

A number of folks promote on Vinted and eBay and earn just a little additional money on the aspect, however keep in mind that you’re most likely not making any form of revenue. In the event you filter your wardrobe and promote on some objects that you just don’t put on anymore, you’re unlikely to promote them for greater than you obtain them for. So even for those who handle to promote greater than £1,000 price in a yr, you’ve probably nonetheless made a loss. 

Now, for those who purchased objects particularly to promote them on for a revenue, you’re thought-about to be buying and selling – extra on this beneath. 

Reality: You solely need to pay tax for those who’re “buying and selling” or making a revenue

The important thing phrase is “buying and selling”. In the event you’re aiming to make a revenue, then you definitely’re more likely to be buying and selling and will have to pay tax. HMRC has a handy tool you need to use to work out whether or not it is advisable to pay tax on what you earn. 

Promoting previous garments and possessions isn’t buying and selling, however shopping for objects with the intention to promote them on for a revenue is buying and selling. 

In the event you promote one thing for a revenue of greater than £6,000, comparable to jewelry or artwork, then you will have to pay capital good points tax on the merchandise – that is fully separate to earnings tax. 

Fiction: If I make one thing to promote it doesn’t rely

In the event you like to stitch youngsters’s garments, hand make pottery or bake cupcakes to promote on, then you definitely may be questioning if this counts as buying and selling. In case your interest is making you cash, you may must be paying tax on it. You continue to get the £1,000 buying and selling allowance as above, although, so you can also make just a little additional money tax-free. 

Do I would like to fret concerning the new aspect hustle tax guidelines?

The brand new reporting guidelines for digital platforms have confused lots of people, whether or not they have a aspect hustle or simply promote undesirable objects. It’s probably rubbed folks up the unsuitable means, with the opinion that HMRC is placing an additional tax on low-earners attempting to make just a little more money. This isn’t the case, with the precise tax being precisely the identical as earlier than. 

Nonetheless, there’s a little bit of concern about sellers who do owe tax, getting it unsuitable of their tax returns, due to the complicated timelines. Promoting websites, like eBay, Vinted and Airbnb have till the top of January to report how a lot cash some customers made final yr, which can lead to some sellers paying extra tax. However, as a result of the UK tax yr runs over a distinct interval – April 6 to April 5 – it might find yourself complicated folks as to how a lot tax they really owe.

In the event you use any digital platforms to promote items or a service, you need to make sure that it’s not thought-about to be buying and selling and, whether it is, that you just’re incomes lower than £1,000 per yr from it. If you do think you might need to file a tax return, the deadline is 31 January for the tax yr up till April 5 the earlier yr.