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For many entrepreneurial people, being a part of the gig economy is a way to have a fully flexible career or earn additional income on the side of your full time work. But from 1 January 2024, those in the gig economy should be aware that HMRC is making major changes to how tax is reported and paid.
Keep reading to find out what the changes are and if they apply to you.
The gig economy is another term for those working freelance jobs or those with a side hustle alongside full time employment. This flexible way of working is becoming more popular as workers prioritise the importance of a healthy work-life balance.
While some people become a part of the gig economy and take on a side hustle to earn some extra cash, for many, it’s a way to take control of their career. Recent data from our 2023 SME Insights Report shows that 40 per cent of businesses started as a side hustle.
Some popular ways people engage in side hustles is by taking on work through digital platforms such as food delivery services or selling their products on an online marketplace. But for those running a side hustle, major HMRC tax changes are coming on 1 January 2024. Will your side hustle be affected?
From 1 January, HMRC has asked many popular side hustle platforms to report how much money people are making on the platform. HMRC will then pass this information on to the tax authorities. This means that authorities will have the same visibility of income for those who earn money from these digital platforms as they would a traditional business.
However, these new rules won’t apply to you if you’re already correctly reporting your income on your tax return. You’ll still be expected to submit your own tax return and pay your taxes as usual. HMRC will then cross check this with the numbers provided by the digital platforms.
The new changes will only affect those who aren’t reporting, or are underreporting, their income to HMRC. These changes come as part of wider regulations to combat tax avoidance, specifically for those who earn additional income from working side hustles as part of the gig economy.
Whether you earn an additional income as part of a side hustle or make your full living through freelance work on these platforms, the new changes will apply to you.
Some of the type of work affected by the changes include:
Find out more about the new reporting rules for digital platforms on the government website.
However, these new tax changes don’t take away from the benefits of being a part of the gig economy. Working as a freelancer (whether on the side of full time work or as your sole source of income) can have many advantages.
The gig economy is an attractive prospect for those who can’t (or don’t want to) work the traditional 9 to 5. Choosing your own working schedule can work well for everyone from students and parents to nomads and travellers.
One of the main benefits of working for yourself is that no one understands what you need for your own mental health better than you do. Being in control of when and where you work – as well as the types of jobs you take on – can help you create a better working environment that suits you.
Find out more about ways to improve your wellbeing as a freelancer here.
Of course, the gig economy often calls to those who follow their passions. Maybe you do private hire driving work because you love the freedom of driving all day or perhaps you proudly sell your handmade crafts on an online marketplace. If you’re studying at university or prioritising raising a family, a part-time side hustle as a food delivery driver may give you the freedom (and financial security) to focus on what’s important to you.
If this appeals to you, you can find out more about starting a side hustle here.
With these latest HMRC changes approaching, now is a good time to make sure you’re fully aware of what goes into paying tax as a self-employed person.
If you’re working a side hustle on the side of additional full time work, make sure you’re aware of the second job tax rate.
From registering for Self Assessment to completing a tax return, learn how to do a self-employed tax return here.
And of course, make sure you’re registered as self-employed with HMRC.
Depending on the work you do, you may also need insurance to make sure you and your customers are safe.
Did you know about these tax changes for side hustle platforms? Let us know how you feel about them in the comments below.
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Rosanna Parrish is a Copywriter at Simply Business, specialising in legal and HR content. Trained at London College of Communication, she has been creating content professionally for eight years at publications across the UK and Spain. Starting her career in health insurance, she also worked in education marketing before returning to the insurance world. Rosanna also writes about wellbeing in the workplace. She lives by the sea and does her best writing in coffee shops.
We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer
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