Recently, there has been a lot of misinformation on social media /what a surprise!!!/ about the new rules for online platforms reporting sales data to HMRC. This was quickly given the nickname "side hustle tax", even though no new tax was imposed. It raised a lot of concerns, and I have received quite a few questions from clients regarding the changes. The general belief is that you must pay tax if sales income hits a certain threshold, like the £1000 trading allowance. This is completely incorrect, and I would like to add some clarifications.
Platforms like Etsy, Amazon, Vinted, eBay and Airbnb are now obliged to share with the UK tax authorities how much income sellers make. This regulation also covers platforms which allow the provision of food delivery or taxi services. Previously, HMRC was able to request and receive information from online marketplaces, but from 01/01/2024, these platforms are obliged to collect sellers' data such as bank account details, volume and value of transactions, and report it regularly to the Tax office with the first report due in January 2025. There are a lot of rumours that people will be taxed on their sales when they are clearing their homes of unused or unwanted items, and HMRC is coming after them next year. This is more than misleading. Although the way of sharing information has changed, the rules for tax have not, and if you are selling clothes that your child has outgrown or you are clearing the garage and attic, you don't have to pay any tax. In order for this income to be taxed, there must be a trade, and HMRC is clear on their understanding of trade in the income manual - there must be an intention to make a profit and there must be systematic and repeated transactions. You can find the "meaning of trade" HERE. So if you are super good at selling your ripped jeans or the Christmas present from your mother in law, most likely you won't be impacted by this.
Digital platforms are used by many full-time business owners, but they are also used by people having additional income streams, the so-called "side hustles". This is trading to earn something additional alongside another job. Examples are people renting out a room in their home, selling pet accessories on eBay or being part-time Uber drivers with their own car. This is trade! It is a business, and the business owners must register and submit a self-assessment tax return. This does not necessarily mean you have to pay tax. You can claim a rent-a-room allowance, for example, and earn £7500 tax-free from a room in your home. Or if you are selling for profit, but your total sales are less than £1000 you don't even need to register to file tax return.
In summary, someone who occasionally sells used items online for less than the original price and has no intention of making any profit at all will not have to pay tax. However, people with the intention of making a profit and earning extra income will have to register with HMRC and pay the tax due.
