New ‘side hustle’ tax rules explained

What are these new ‘side hustle’ tax rules?

Initially, the reports of HMRC ‘warning’ people about these new tax rules caused some panic for those working in the gig economy.

There was a particular focus on those who may be selling items via online sites, such as eBay or Vinted, creating concerns for those who hadn’t realised that making a profit this way could be taxable.

These new rules, however, do not affect the individual in this situation, it is the digital platforms, such as Etsy, Vinted, eBay, Deliveroo, Uber etc, that will need to act on the changes.

They now need to start collecting information about the people who make money through their sites and then send it on to HMRC and the individual on or before the following 31st January (for example, Jan 2025 for the period 1st Jan 2024 to 31st December 2024).

HMRC will be able to exchange this data with other tax authorities in other countries that have signed up to the new rules.

This new process is to help HMRC identify the people who are earning money through these platforms so they can check to see if these individuals should be paying tax if they’re not already.

Do I need to worry about the new rules?

Ultimately, if you have a trading or miscellaneous income (before deducting expenses) and you end up earning less than £1,000 for the tax year, then it is not a requirement to let HMRC know about your ‘side hustle’ and you won’t have to pay tax on your profits.

If you are selling clothes, toys etc that you no longer want or need, then it is unlikely to count as trading or miscellaneous income, as this is usually a case of trying to get back some of the money originally spent on these items and charging less than you paid for them. In this situation, it’s doubtful you’d be selling regularly with the intent of making a profit.

If, however, you were purposely buying items to resell for a profit, or making items to sell, then this is likely to count as trading.

It’s also worth noting that the online platforms won’t collect and send your data if you’re selling less than 30 items a year, or your total earnings are under £1,700 from these sales.

If it turns out that you should be paying tax and you haven’t been declaring this income, then the information shared by the online platforms will make this apparent to HMRC.

Expenses

If you do need to start paying tax, then there’s a possibility you can claim back on business expenses, which can help to reduce your tax bill.

Here are some examples of typical allowable expenses.

• Travel costs
• Office costs
• Training courses – but they must be related to your current line of work.
• Financial costs – such as hiring an accountant.
• If you work from home, you may be able to claim a proportion of costs for your heating, electricity, Council tax, mortgage interest/rent and internet/telephone use.

For more information on this, take a look at our Sole Trader Expenses page.

We hope you found this page helpful. Our team of experts are available to answer any queries you may have, so drop us a line on 01442 795 100, email sophie.lewis@dolanaccountancy.com, or contact us via live chat.