HMRC reporting changes – will your side hustle be taxed?
4-minute read
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 or with side hustles 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.
1 January 2024 tax reporting changes – HMRC clamps down
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 changes won’t affect you if you’re already correctly reporting your income on your tax return. How you pay your taxes won’t change – you’ll still be expected to submit your own tax return and pay your taxes as usual. The biggest change comes from HMRC being able to cross check this information with the numbers provided by the digital platforms.
You’ll also receive a copy of this information which can be useful for keeping accurate records of your sales and income.
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.
Paying taxes on your side hustle – who will be affected by the changes?
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:
- food delivery workers using apps like Uber Eats and Deliveroo
- those selling their products on digital marketplaces like Etsy
- taxi and private hire drivers on apps such as Uber
- those renting out short term properties or offering experiences on Airbnb
- <br />freelancers finding work on platforms like Upwork and Fiverr
Find out more about the new reporting rules for digital platforms on the government website.
Who needs to report their side hustle earnings
No matter your line of work, there’s a £1,000 tax free trading allowance in place for anyone making an income. This means that if you’re earning over £1,000 from your side hustle, you’ll need to report this to HMRC.
This means that anyone working, part-time or full-time, on a self-employed basis and earning over £1,000 will need to be paying tax on their income.
Selling goods and services online – when do you need to pay?
If you’re regularly selling clothes on apps such as Vinted, Depop, or eBay, there’s a chance you may tax on your earnings if it’s more than £1,000 in a year.
This all comes down to whether or not you’re classed as a trader. For example, if you’re using these apps to sell your personal possessions for less or the same price as what you originally paid for them, you’re unlikely to be considered a trader. This means that you won’t need to pay tax on your sales.
However, if you have a side hustle of sourcing and reselling second hand clothes, you’ll likely need to pay tax. This is because you’re aiming to make a profit on the clothes you sell, making you a trader.
This doesn’t only apply to clothes and could include any item you regularly sell for a profit (including that you make). It also includes services you provide, not just items.
You can find out more information about selling online and the tax you need to pay here.
HMRC also has a helpful video which explains who’ll need to be paying tax under these new changes.
What is the gig economy?
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.
Benefits of the gig economy
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.
Flexible schedule
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.
Prioritising your wellbeing
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.
Doing what you love
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.
Paying tax on your side hustle – a quickstart guide
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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Written by
Rosanna Parrish
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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