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If you’re earning money through a side hustle by selling online, it’s important to be aware that online platforms are now required to share information about sellers with HMRC.
This could mean you’ll need to pay tax on any profits, but the situation varies depending on individual circumstances. Here’s an overview of the new reporting requirements and how to determine if you owe tax on the profits from your online sales.
So has anything changed?
There has been a lot of talk in the media about a “crackdown on side-hustles”, but tax obligations actually haven’t changed. The only difference is that now HMRC will have greater visibility of anybody using online platforms such as Etsy or Fiverr.
HMRC have estimated that this could affect up to five million people. This means that more people will need to register as self-employed and submit a Self Assessment annually.
It's important to note that this isn't a new requirement; these individuals have always been obligated to register and file a Self Assessment, but now they won’t be able to hide from HMRC under the new reporting rules.
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Let’s break down the new reporting rules:
Online selling platforms, like eBay, will need to track and store data on their sellers to identify anybody who exceeds certain thresholds. This includes more than 30 transactions in a calendar year or those that earned more than £1,000.
Those that do, will have their data submitted to HMRC by the end of January annually. The first reports are due in January 2025 to cover the 2024 year.
Will sellers know if they’re in the report?
Yes, sellers will be notified if their data is amongst those shared. Platforms will have the responsibility to notify any sellers who are included.
Now that we’ve covered the basics, here are some common questions that many side hustlers are asking about the new reporting rules:
Frequently asked questions:
1. How do I know if I need to pay tax?
If you regularly sell online, you should be keeping an eye on your earnings anyway. HMRC only allows you to earn £1,000 of ‘extra income’ before you’ll need to sign up as self-employed and complete a Self Assessment. One of the best ways to track your income is by signing up for an online accounting software like Crunch.
Many people falsely believe that HMRC will notify you if you need to and if you don’t receive notice that that's fine - but this is not the case. The responsibility to identify if you need to pay tax on side-hustles is on the individual. If you aren’t sure if you need to register then be sure to check out HMRC’s employment checking status tool.
2. How do I sign up as self-employed?
There are a few different ways to register as self-employed. The majority of people will register online, but you can also do it via post or phone. It’s important to note that you must register by the 5th of October if you need to send a tax return. If you're new to the world of self-employment, be sure to check out our article covering the key dates in the UK tax calendar.
3. I only sell online for fun - do I still need to pay tax on my hobby?
This depends on whether you’re doing it to create revenue or just selling items in your home that you no longer want or need. HMRC have a handy guide which covers the nine badges of trade to help identify whether it’s a hobby or a side-hustle.
4. I sell across platforms - how will this affect me?
The platforms will likely all have the same requirements which means you could be reported multiple times. The issue is that as an online trader - the report you get from each platform is likely to be different. This means you’ll need to have your own way of tracking income without solely relying on the platforms to make sure you’re meeting your tax obligations.
5. I also have a full-time job, haven’t I already paid tax?
It’s a common misconception that ‘employed’ and ‘self-employed’ are opposites. That isn’t true, it’s actually very common for people to be both according to HMRC. As an employee, the tax you pay is calculated by your employer and automatically deducted from your paycheck.
This isn't the case for any income generated from self-employment. So you’ll need to keep a record of total income and then work out your profits minus expenses. These profits will then be taxed and possibly open to National Insurance contributions. If you’d like more information, then be sure to check out our article covering paying employed and self-employed tax.
How to make sure your side-hustle is tax compliant
The best and easiest way to do this is by working with a reputable accountant like Crunch. They’ll be able to help you identify what income you need to be recording and what tax you’ll need to pay as a result. Here at Crunch, our paid subscriptions offer unlimited access to accounting experts - this means you don’t have to worry about racking up extra costs when you’ve got questions.
Crunch makes accounting simple for everyone—from sole traders and freelancers to limited companies and ecommerce businesses. Our powerful software, combined with expert accountants, helps you save time, and money, and even reduce your tax bill—all in one affordable monthly package.
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