Navigating the New “Side-Hustle Tax” Rules: What You Need to Know
If you’re selling second-hand clothes online or renting out a spare room on platforms like Airbnb or Vinted, there are important changes you need to be aware of in the tax landscape.
As of January 1, popular digital platforms such as eBay, Airbnb, Etsy, Amazon, and Vinted are now required to share seller information with HMRC, the UK tax authorities. This means if you’re making extra income through these “side hustles,” you might find yourself subject to new tax regulations.
These rules are not just a local initiative but part of a global effort coordinated by the Organisation for Economic Cooperation and Development (OECD) to crack down on tax dodgers. The UK has signed up to these international rules to ensure a fair and level playing field for all taxpayers.
Under the fresh guidelines, digital platforms will regularly report the income earned by sellers on their sites. This applies not only to the sales of goods, such as second-hand clothes or handmade items but also to services like taxi hire, food delivery, and short-term accommodation lets.
The crucial point to note is the earnings threshold set at more than £1,000 a year. If your online side hustle crosses this limit, you are required to register as self-employed and file a self-assessment tax return at the end of the financial year.
HMRC emphasizes that these rules aim to assist online sellers in getting their taxes right the first time and to detect any deliberate non-compliance. The end goal is to maintain a fair and equitable tax environment for everyone.
For those earning below the £1,000 threshold, you may not have to fill in a tax return. However, it is strongly advised to keep records just in case you are asked for them.
Online platforms will start reporting seller information to HMRC, but this won’t commence until the end of January 2025. Adam Jay, CEO of Vinted, reassures users that the impact will be minimal, affecting only a small proportion of the platform’s sellers.
However, not everyone is happy with these changes. Social media users have criticized the new rules as “unfair,” especially for low-income sellers who rely on platforms like Depop and Vinted to make ends meet.
It’s important to note that selling second-hand items doesn’t automatically mean hefty taxes. The key factor is whether you’re making a profit, and even then, it depends on your individual tax situation.
Tax expert Emma Rawson suggests that if you think you could be earning above the minimum £1,000 trading allowance, it’s best to proactively contact the tax authorities. Waiting for official communication might result in penalties.
In conclusion, while these new rules may seem daunting, they aim to create a fair tax environment and ensure that everyone contributes their share. Stay informed, keep records, and if in doubt, reach out to the tax authorities proactively.
Founded in 2017, Fintuity has fast become one of the only digital Independent Financial Advisers (IFA) in the United Kingdom. Fintuity offers a wide range of financial advisory services including pensions, protection, investments and mortgage advice. The key difference is that as an exclusively digital service, we can offer significant savings and a service that is direct to you and on demand.