A charity has warned of confusion as the HMRC launches a new regime targeting people making an income through side hustles. Everything from selling items online to making an income as an online influencer to dog walking, delivery driving and even baby sitting could – in theory – generate a tax bill.
Sites such as eBay, Vinted and Airbnb have until the end of this month to tell HMRC about the amount of money some users made in 2024, details that may lead to the sellers having to pay more tax. At the same time, individuals making significant sums of money are required to fill in a Self Assessment tax form. These will be cross-checked against information supplied by the sites.
Platforms have to tell HMRC if someone makes more than £1,700 in a year or completes 30 transactions. At the same time, everyone has a trading allowance each tax year, which means Britons are required to fill in a tax return and pay taxes if they earn more than £1,000.
There are concerns that problems could arise because the UK tax year runs over a different period from the details being reported to HMRC. The Low Incomes Tax Reforms Group (LITRG), a charity, said that more people might now have to file tax returns, but using information they find hard to manage.
The new push to uncover how much people are earning online is an international initiative by the Organisation for Economic Co-operation and Development (OECD), with reporting dates of January to December. However, the UK tax year runs from April to April, which means that the figures filed to HMRC by the platforms will cover a different period. The LITRG says it is worried that online traders will use incorrect figures in their tax return.
Meredith McCammond, a technical officer with the LITRG, said: “Just one quarter of the data people will receive is pertinent to the current tax return. That could lead to confusion, especially for those filing a return for the first time and needing help during HMRC’s busiest period.”
Dawn Register of the accountancy firm BDO told the Observer that the date discrepancies mean HMRC won’t get data that is accurate. But she said: “It will be enough to identify if an individual has been trading – and to launch a tax investigation if there are high turnover numbers.
“The new rules may well mean that there are some nasty surprises in store for people who are either ignorant of the rules or trying to get away without paying tax on their trading earnings. There may also be some surprises for HMRC when they see how much some people are earning from online platforms.”
HMRC operates an online checking tool here – which asks a series of basic questions about what people are selling. This includes a question relating to the associated income and advises anyone bringing in more than £1,000 that they will need to fill in a self-assessment tax return, even if this income does not make them liable for paying income tax.
A spokesperson for HMRC said that if someone was selling unwanted items from around the house, they would be unlikely to have to pay tax. But if they were trading or make a gain on the sales, they might be liable.
They said: “For people selling personal possessions online absolutely nothing has changed. If you aren’t trading and just occasionally sell unwanted items online there is no tax due.”