Sussex Exclusive Magazine. Issue 7

How taxing is a
side hustle?
Recent alarmist headlines
warned that HMRC were
rolling out a new “side hustle
tax” which would affect
people selling on platforms
like Vinted and Depop. There followed
a flurry of panic that if, for example,
you sell second-hand clothes online you
could end up paying tax on the money
you make. However, the headline is
misleading, so in this post we take a closer
look at the new side hustle rules.
The new rules
Although new HMRC rules came into
force in January 2024, there is no new tax
on side hustles. The rules relate to reporting
requirements between various online
platforms like Vinted or Depop and HMRC.
They do not create new tax obligations.
From 1 January 2024, UK-based
online platforms are required to collect
information about people who make
money through their platforms and send
this information to both HMRC and
to the individual themselves. There is a
specific time period within which the
information collected must be sent.
The information that will be collected will
be in respect of your identity, National
Insurance number and the money you
receive through the platform. All new sellers
now have to share their National Insurance
number with the sale platforms. From
2025, all existing sellers will also have to
share their National Insurance number.
Which platforms are affected?
The rules are quite complex but UK-based
platforms that help facilitate transactions
between sellers of goods and services and
customers are affected. In other words,
platforms like Vinted and Depop. But it’s
important to note, if you’re selling via an
overseas platform, although they may not
be affected by these rules, the platform
may be caught by their own country’s
rules, and any information collected
there, may eventually be shared with
HMRC in the UK.
Which sellers are affected by the
new rules?
If you make money, for example by
selling second hand clothes or other items
via online platforms, you may be affected.
But that does not necessarily mean you
will have to pay additional tax.
The rules do not apply to those who sell
a few personal belongings every now
and again (i.e. you’re just having a clear
out), but you will be caught by the rules
if you’re buying and selling with the
intention of making profit (as you will be
deemed to be “trading”).
What are the tax obligations when
selling via a side hustle?
Regardless of the new rules, you are
always responsible for complying with the
UK’s tax obligations. Therefore, it is your
responsibility to check what, if anything,
you are required to do in order to be
compliant. For this reason, it is important
to keep records of any sales, so you know
how much you have received. Thereafter,
your obligations are as follows:
• If you are in employment, you can
earn up to £1,000 a year extra from
an online side hustle without having
to pay tax on it. This is your tax-free
trading allowance.
• If you are not employed (for example,
you’re self-employed), you can earn
up to (but no more than) £1,000
without having to pay tax or having to
register as self-employed and file a Self-
Assessment tax return at the end of the
financial year.
• If you’re self-employed and your sales
exceed £1,000 in a given tax year,
then you’ll need to do a tax return. If
you’ve never done one before, you’ll
need to register for Self Assessment
first. If you haven’t done this yet,
contact HMRC as soon as possible.
How much tax will I have to pay?
If you do have to pay tax, how much
will depend on your circumstances
and how much you have earned. You
have a tax-free personal allowance. The
basic personal allowance is £12,570 for
2023/24. If that applies to you, you will
pay tax on any profits made over that.
Profit is any money made after you
deduct any allowable expenses. The rate
of tax you’ll need to pay will depend on
your income tax band. The current tax
band for earnings between £12,571 and
£50,270 is 20%.
High-value items may be liable for
Capital Gains Tax which is 10% if
you’re earning up to £50,270 in total
and 20 % if you’re earning above that
threshold.
Other points to bear in mind
If you’re reselling old personal items for
less money than you originally bought
them, you won’t need to pay any tax,
even if you make over £1,000 a year.
Similarly, you can resell gifts and not be
deemed as trading, because you didn’t
buy the original item with a view to
making money.
Get back to your side hustle
The new rules don’t add any further
responsibilities or obligations, to those
which you already had, apart from
having to answer a few extra questions
when you sign up to an online
platform. In fact, they should make
your record keeping easier because
information will be supplied to you.
But you should still always keep your
own records in any event.
If you would like to discuss any of the
issues arising from this post, please get
in touch.
Stuart Ritchie is a
chartered accountant
and chartered tax
adviser with over
30 years’ experience.
He is a tax partner
with Ritchie Phillips
LLP based in
Horsham and can
be contacted on
020 3195 1300 or
stuart.ritchie@
ritchiephillips.
co.uk
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