What is the “new" side hustle tax?

Social media and news outlets have blown up over the HMRC clampdown on income from eBay, Vinted, Depop and other platforms. Amongst all the confusion, the truth is - there is no “new side hustle tax” or even a change to existing tax rules. Let us break down the misconceptions for you.

The new rules from 1 January 2024 are that these online platforms will need to collect and send information over to HMRC about people who make money from their platforms. There are no new tax obligations arising from these changes for individuals as the existing rules are unchanged. The changes to reporting do mean that if people who should have been reporting their income from online platforms have not been doing so, HMRC are more likely to find out about it.

So what are the existing rules?

Broadly, HMRC say you don’t need to declare or pay income tax on if you earned less than £1,000 on these platforms or other miscellaneous casual income (babysitting, gardening, tutoring) in a tax year. This is because everyone in the UK has £1,000 “trading allowance” which is additional income that is tax free.

Note that you should calculate the amount you received before platform fees were taken off. The £1,000 must include income across all platforms and other miscellaneous side hustle/gig income. It’s still advisable to keep records of your income but you don’t need to declare it.

What if I earned more than £1,000?

You need to consider if you are “trading”. Trading means you are buying and selling goods with the intention of making a profit.

In general, selling unwanted personal possessions such as your children’s used clothing or toys would be unlikely to be trading as there isn’t an intention to sell them to make a profit and you rarely get more than you paid for it. The exception is if you made certain high value sales (e.g. antiques, jewellery) for more than £6,000 each in a tax year as this would be caught under capital gains tax.

On the other hand, selling large quantities of crafted items on Etsy, for example, would be likely to be trading. Be mindful that what starts as a hobby can sometimes develop into a commercial business.

So if you are “trading” and earned more than £1,000 then you will need to register for self-assessment and file a tax return.

There may be specific cases which are less clear cut and fall in a grey area. Read HMRC guidance on selling online here and seek professional advice if in doubt.

Disclaimer: The information contained in this blog is intended solely for general informational purposes only and is not intended as a substitute for professional advice. While we have made every attempt to ensure that the information contained in this blog is correct, we are not responsible for any errors or omissions, or for the results obtained from the use of this information. Before making any decision or taking any action, you should consult a professional adviser.