If you have watched or read the news in the past couple of weeks you may have learned about a new ‘side hustle tax’ that HMRC have ‘introduced’.
To be clear, there’s no new tax, the rules are the same as they were. It’s just the media making a story from it.
What has changed, however, is that online marketplaces such as Vinted, eBay, Airbnb, Deliveroo & Uber will be sharing their data with HMRC. So anyone who was earning money from these platforms but not declaring it, are now at a greater risk of being found out from HMRC.
What are the rules?
If you start the business of selling items then you should register with HMRC – normally for self-employment. You then need to file a tax return before the 31st January following the tax year ending the previous 5th April.
If your total sales are under £1,000, then you don’t need to register or file a return. Just keep records in case you do go over £1,000 of income and need to register.
If you receive rental income on a property you live in, or a 2nd property, then you need to register to complete a tax return if income exceeds £2,500. If your income is under £1,000 you don’t need to contact HMRC at all. If it’s between £1,000 & £2,500 you can contact them. The link is here.
Do I get anything tax free?
Yes, you can receive up to £1,000 trading allowances on both forms of income.
Is it worth registering if my income is under £1,000?
It could be, it depends on your goals for the business. If you want to grow it, then it could be registering early and getting advice from an accountant such as ourselves.
Plus, if you’ve made a first year loss, you could potentially offset it against other tax paid and claim a refund.
I’m selling items personally, should I be worried?
You only need to pay tax on selling items if you’re starting a trading business. If you’re, say, selling old children’s toys and / or clothes, then even if you’ve gone over the limits above, you are not liable to any tax. If you are this person and HMRC are requesting a tax return. Inform them that you’re not trading and that you’re only selling old items you no longer need.
Get in touch with us! We’re always here to help 😊