25/01/24

Side Hustle Tax | New HMRC Rules

Side Hustle Tax | New HMRC Rules
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‘Side Hustle Tax’ has, of late, featured heavily in the press and covers the generation of income, frequently from a source in addition to that of regular employed income, and often involving the sales of goods or services from digital platforms involving popular apps or websites such as Vinted, Uber, Bolt, eBay and Not on The High Street.

On 1 January, 2024, HMRC introduced new rules affecting the manner in which digital platforms are required to collect and report information about seller transactions and income which must be presented by January 2025.

These new rules arise from the UK signing a Global Agreement involving the Organisation for Economic Cooperation and Development (OECD) allowing tax officials to share information with authorities in other countries.

On 3 January 2024, HMRC published its updated Guidance on ‘Selling online and paying taxes’.

Regularly selling goods or services through an online market place is likely to be regarded as a ‘trade’ whereby any accruing profit will attract a tax liability, although occasional, casual disposal of unwanted domestic items is not likely to.

Nazaqat Maqsoom outlines the position generally.

The Position | KANGS HMRC Investigations Solicitors

Although new reporting rules have been introduced, the amount of tax payable on ‘side hustle earnings’, and the date for payment, have not changed.

Information Provision by Online Market Places

HMRC has issued guidance stating:

  • an online marketplace is somewhere that handles and enables the sale of goods and services,
  • online marketplaces will be required to provide data of people selling on their sites,
  • online marketplaces will be required to provide details of seller income from their sales,
  • the data provided to HMRC should also be provided to the seller, including the profits the seller has made, thereby enabling the seller to establish whether they should register for self-assessment.

The Requirement to Register for Self-Assessment to Tax

  • To ascertain whether a ‘side hustle’ results in a tax liability, it is necessary to determine if an individual is trading as a business or not.
  • HMRC class on-line selling as a form of trade, requiring individuals to register for self-assessment if they make a profit of over £1,000.00 trading on-line.
  • HMRC has given brief examples of which methods and reasons that will trigger the need for a self-assessment when selling a service or product on-line.

HMRC provides examples of what may constitute trade:

  • Reselling used clothes (or other items)- unlikely to be trading
  • Buying in order to resell – likely to be trading
  • Making and selling – likely to be trading.

Penalties for Non-Compliance

The New Rules are simply a means for HMRC to capture details of all online trading activity which has previously been unreported, thereby resulting in the loss of revenue to HMRC arising from the profits of such trading.

Accordingly, all of the existing penalties for failing to register for self-assessment and comply with HMRC rules and regulations continue to apply, including the imposition of fines and, in severe cases, imprisonment, when:

  • tax has not been paid when it should have been,
  • there has been a failure to register for and pay self-assessment taxes.
  • failure to comply with a ‘notice to file’ letter,
  • deliberate tax evasion is discovered
  • any Formal Notice from HMRC is ignored.

Who Should I Contact for Help and Advice?

If you are accustomed to trading in the pursuit of profit on any form of trading platform, or have any involvement in any other form of ‘side hustle’ from which you earn a profit, where such profits have never been disclosed to HMRC, there should now be a greater expectation that such activity will come to the attention of HMRC.

Accordingly, you should seek professional advice and guidance as should also be the case if you receive any form of Notice from HMRC.

The Team at KANGS is accustomed to negotiating all manner of failures to comply with the tax regulations with HMRC, seeking to mitigate each client’s situation as far as is possible.

Our Team will support you throughout the entirety of any HMRC investigation or proceedings, seeking to achieve the most satisfactory outcome available as quickly and economically as possible.

If we can be of assistance, please do not hesitate to contact our Team through any of the following channels:

Telephone: 0333 370 4333

Email: info@kangssolicitors.co.uk

We provide initial no obligation discussion at our three offices in London, Birmingham and Manchester. Alternatively, discussions can be held virtually through live conferencing or telephone.

Hamraj Kang

Hamraj Kang
Senior Partner

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Tim Thompson

Tim Thompson
Partner

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Nazaqat Maqsoom

Naz Maqsoom
Associate

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