[10.01.24]

The first week of 2024 saw an explosion of media stories talking about tax on “side hustles”.  This was in response to the new HMRC reporting rules for digital platforms.  The media story, or misinformation, was further amplified on social media, causing many individuals to unnecessarily worry that they could end up with a tax bill.

The new reporting rules, which are part of a global initiative by the Organisation for Economic Co-operation & Development (OECD), stipulate that from 1 January 2024 digital platforms will have to make annual reports to HMRC about those who sells goods or services through them.  In this context the definition of a digital platform is any website or app that facilitates transactions between sellers and their customers. This can include individuals selling goods on eBay, Etsy, Vinted etc. but also those providing services or letting out property.

Misleading media stories resulted in these reporting rules being badged as the introduction of a new ‘side hustle tax’. Concerned individuals took to social media to ask whether this meant that they would have to pay tax when selling their second hand clothes or clearing out the attic. Others complained that the situation was unfair and could amount to double taxation.

However, there is no new tax on side hustles (and no plans to introduce one). The platform reporting rules will provide a significant amount of extra information to HMRC, but there is no change to the underlying rules as to when individuals selling online are subject to tax.

To determine if online sales can lead to a tax liability we need to go back to first principles and ask is there a trade?  Ultimately selling unwanted personal possessions is unlikely to constitute a trade. However, individuals who are buying or making things with a view to selling them for a profit are likely to be trading.

Even if there is a trade, tax will only be payable if a profit is made. The trading and property allowances also allow taxpayers to earn up to £1,000 a year of gross income before any tax becomes due. As a result, many platform sellers will never have to worry about their activities creating a tax liability.

In the furore that followed the media stories HMRC published a new information sheet on selling online and paying taxes.  Click here to read this document.

Castletons Accountants