HMRC Clarifies the New ‘Side Hustle Tax’ for Online Sellers

Starting January 2025, online marketplaces such as eBay, Vinted and Airbnb will have to send HMRC information about their sales to ensure compliance with the side hustle tax. The move comes in line with the new requirements that are in place to make digital trading more transparent and payment of taxes easier.

However, HMRC insists that the changes do not mean a new tax or different tax obligations. So, what does it actually mean? Let us have a look.

What Does the Side Hustle Tax Mean?

The 'side hustle tax,' as some have dubbed this move, does have quite a daunting name. But HMRC assures the public that no tax laws have changed. This only means that, since the start of 2024, digital buy-and-sell platforms such as eBay or Airbnb have had to report sales data to HMRC. It is not a new tax, per se, but an attempt to ensure better compliance with already existing rules.

Now, from January 2025, platforms will contact those who met the criteria for side hustle tax in 2024 to advise that their sales data will be shared with HMRC. These criteria include:

• Selling 30 or more items or earning approximately £1,700 through any of the online marketplace platforms
• Providing a paid-for service, such as letting out a holiday home or offering services online

Do You Need to File a Tax Return?

HMRC's data gathering to see who is required to pay side hustle tax from these platforms does not mean that a person has to file a Self Assessment Tax Return. But it does mean that certain activities will now have tax consequences.

But you must consider registering for Self Assessment when:

• Trading Goods for Profit - You buy goods with the intention to sell them at a profit.
• Providing Services Through a Platform - This will involve services such as delivery driving and renting out a property through platforms such as Airbnb.
• Exceeding the Income Threshold - Generating total income of more than £1,000 (before deducting expenses) from trading or through online services in a tax year.

Support for Online Sellers

HMRC continues to stress that there is no reason to be alarmed though. Angela MacDonald, HMRC’s Second Permanent Secretary and Deputy Chief Executive Officer, has publicly stated:

HMRC is working closely with digital platforms to ensure sellers understand their side hustle tax responsibilities. Those unsure about their obligation to file a Self Assessment Tax Return for the Tax Year 2023/24 can check their eligibility on GOV.UK. For first-time registrants, Self Assessment registration is also available through the same portal.

Conclusion

Another major step forward in ensuring tax compliance by online sellers has been the mandatory sharing by digital platforms of data regarding sales. While it may all sound quite intimidating, it should not be forgotten that no new rules about taxation have been instituted. The focus of Side Hustle Tax remains firmly on individuals conducting businesslike activities, not casual sellers.

Anyone who trades regularly or provides services via online platforms needs to be aware and compliant with the Side Hustle Tax. This will be helped by clarity from HMRC and online platforms themselves so that sellers know their responsibilities and do not find themselves facing an unexpected tax bill.