1 January 2024 tax reporting changes – HMRC clamps down
From 1 January, HMRC has asked many popular side hustle platforms to report how much money people are making on the platform. HMRC will then pass this information on to the tax authorities. This means that authorities will have the same visibility of income for those who earn money from these digital platforms as they would a traditional business.
However, these changes won’t affect you if you’re already correctly reporting your income on your tax return. How you pay your taxes won’t change – you’ll still be expected to submit your own tax return and pay your taxes as usual. The biggest change comes from HMRC being able to cross check this information with the numbers provided by the digital platforms.
You’ll also receive a copy of this information which can be useful for keeping accurate records of your sales and income.
The new changes will only affect those who aren’t reporting, or are underreporting, their income to HMRC. These changes come as part of wider regulations to combat tax avoidance, specifically for those who earn additional income from working side hustles as part of the gig economy.
Paying taxes on your side hustle – who will be affected by the changes?
Whether you earn an additional income as part of a side hustle or make your full living through freelance work on these platforms, the new changes will apply to you.
Some of the type of work affected by the changes include:
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food delivery workers using apps like Uber Eats and Deliveroo
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those selling their products on digital marketplaces like Etsy
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taxi and private hire drivers on apps such as Uber
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those renting out short term properties or offering experiences on Airbnb
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freelancers finding work on platforms like Upwork and Fiverr
Find out more about the new reporting rules for digital platforms on the government website.
Who needs to report their side hustle earnings
No matter your line of work, there’s a £1,000 tax free trading allowance in place for anyone making an income. This means that if you’re earning over £1,000 from your side hustle, you’ll need to report this to HMRC.
This means that anyone working, part-time or full-time, on a self-employed basis and earning over £1,000 will need to be paying tax on their income.
Selling goods and services online – when do you need to pay?
If you’re regularly selling clothes on apps such as Vinted, Depop, or eBay, there’s a chance you may tax on your earnings if it’s more than £1,000 in a year.
This all comes down to whether or not you’re classed as a trader. For example, if you’re using these apps to sell your personal possessions for less or the same price as what you originally paid for them, you’re unlikely to be considered a trader. This means that you won’t need to pay tax on your sales.
However, if you have a side hustle of sourcing and reselling second hand clothes, you’ll likely need to pay tax. This is because you’re aiming to make a profit on the clothes you sell, making you a trader.
This doesn’t only apply to clothes and could include any item you regularly sell for a profit (including that you make). It also includes services you provide, not just items.
HMRC also has a helpful video which explains who’ll need to be paying tax under these new changes.