Britons who make money via side hustle apps, such as Etsy and Vinted, are being remined of their tax obligations in light of “strict” HMRC rules coming into effect.
Those earning additional income from selling second-hand clothes online or renting rooms to holidaymakers will be under greater scrutiny from the tax authority.
However, experts are also clarifying there is “no new ‘side hustle tax’” being introduced by the Government.
As of January 1, companies including Airbnb, eBay and Depop are legally obligated to collect and share details of transactions.
As of January 1, HMRC is cracking down on those who fail to report earnings from side hustle apps
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Anyone who has failed to declare previous earnings with HMRC could be hit with expensive financial penalties.
According to MoneyZine, one in six British workers currently work in the gig economy which is facilitated by many of the apps that will have to report to HMRC.
This means that millions of side hustlers could be impacted by the “strict” HMRC rule which is now in place.
However, this is not a new tax on side hustles as those making over £1,000 have to register as self-employed and file a Self-Assessment tax return.
Victoria Todd, the head of Low Incomes Tax Reform Group (LITRG), explained: “We understand there is a lot of worry among people who sell via online platforms about the changes, including for those who sell personal items they no longer want or to clear space in their home.
“However we want to reassure sellers that there is no new ‘side hustle tax’ and no changes to the tax rules about what income needs to be declared to HMRC or when it needs to be declared.”
The deadline for someone to file a Self-Assessment tax return is January 31 which means side hustlers only have weeks left to do so for the 2022-23 tax year.
Experts from MoneyZine compiled a checklist of what those impacted by the HMRC rule change should do before the end of the month.
It includes:
- Registering for Self-Assessment if your side hustle is earning more than £1,000 annually
- Declaring any previously earned income to HMRC to avoid penalties
- Separating business and personal finances to save time when filing tax returns to save time
- Budgeting and tracking expenses, including equipment and marketing costs, which could be tax deductible
- Learning tax implications, including reporting earnings over £1,000 to HMRC and the £12,750 standard personal allowance.
Etsy users who make over £1,000 a year need to declare their earnings.
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Luke Eales, the CEO of Moneyzine, criticised the “media frenzy” which gave the impression a new HMRC levy on side hustles was being introduced.
He said: “In fact, the only new thing is that certain apps and websites, commonly used for side hustles, will be required to share data with the taxman.
“These apps include everything from Airbnb, Etsy and Deliveroo, to freelancing platforms Fiverr, and Uber.
“While some sites such as Airbnb already voluntarily report user income details to HMRC, this will now be a strict requirement.”
Robert Johnson is a UK-based business writer specializing in finance and entrepreneurship. With an eye for market trends and a keen interest in the corporate world, he offers readers valuable insights into business developments.
