Side Hustle Sales Reporting Could be ‘Chaos’ Waiting to Happen

HMRC is being called on to scale up a communications campaign so that those with side hustles, estimated at up to two million people, understand that they will have to file a tax return on their side hustle sales.

The Low Income Tax Reform Group (LITRG) believes that HMRC has not publicised new rules around online platform reporting which could allow the tax authority to 'suck in' a huge amount of data about individual online sales.

Side Hustle Sales Could Be a Ticking Time Bomb

For the first time, starting this January, the likes of eBay, Vinted, Deliveroo, and Etsy will have to make sales information available to HMRC. However, LITRG fears thousands of people earning from side hustle sales may know little or nothing about any resulting tax liability, and therefore warns of a 'side-hustle time-bomb'.

These rules could catch millions of small-item sellers and makers off guard. The LITRG estimates this could be as many as two million people as HMRC is given access to this sales information. Anyone making more than £1,000 from their side hustles will have to put in a self-assessment tax return for 2023-24 by 31 January 2025.

LITRG further warns that the reporting system might confuse the taxpayer. The data reported by platforms will be for a calendar year, not a tax year, and this could make it very challenging for a seller to accurately calculate their tax liabilities. Different methods of reporting applied by every platform could also complicate such a process.

The phone lines are already the busiest time of the year for HMRC in January. The LITRG tested HMRC's digital assistant with a simple question about registering for taxes and found the response inadequate since the system simply routed users to general links, rather than signposting them to specific guidance.

Concern Over Potential Chaos

Claire Thackaberry, a technical officer at LITGR, warns about the time running out for HMRC to sort this out without any potential chaos following it. She called on HMRC to take the initiative to make it easier to report the side hustle sales and give clear guidance to sellers so that they can properly comply with the new rules.

The new online platform reporting system is expected to be implemented at an estimated cost of £36.9 million.

Conclusion

The tax return rules for income from side hustle sales could catch millions of side hustlers unaware and lead to confusion and panic. So, stakeholders have urged HMRC to step up communication and awareness efforts.