Explaining the ‘side hustle tax’

Digital platforms such as eBay, Etsy, Airbnb, Amazon and Vinted are now required to share seller information with HMRC, as of 1 January 2024. 

Under the new rules, HMRC will receive a breakdown of revenue generated by platform users, which HMRC will use to match up against submitted Self-Assessment tax returns to ensure that the correct amount of tax is being paid. 

If you’re not already paying tax on earnings from additional sources, or if you’re planning to start earning additional income in the near future, you’ll likely be wondering how much tax you’ll need to pay and how to tell HMRC about your additional taxable income.

Paying tax on your ‘side hustle’

According to Aviva, 1 in 5 people in the UK have taken on a side project since March 2020, with 1 in 6 now earning more than £1,000 per month from their second income. 

Each tax year, £1,000 of ‘side hustle’ gross income is tax free – this is your trading allowance. 

Once this gross income goes above the £1,000 threshold, it can be subject to income tax, depending how much taxable income you earn from all other sources. The threshold also applies if you earn taxable income from more than one ‘side hustle’ source.

Explaining the new requirements

The requirements set by HMRC themselves on trading allowances and income tax aren’t new. However, the way HMRC receives information has changed. 

Now that HMRC will receive your sales information independently, you must ensure that the ‘side hustle’ taxable income reported in your Self-Assessment tax return matches the information HMRC receives from the digital platform. 

This means now it’s more important than ever to stay on top of your additional income and submit your self-assessment tax return accurately and on time to avoid any penalties.

Registering for Self-Assessment

Anyone generating more than £1,000 or more in revenue on digital platforms in a given tax year must register as self-employed and complete a Self-Assessment tax return. 
You can register for Self Assessment using this link. If you require any help registering for Self-Assessment or completing your tax return, please contact us.