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Side hustlers beware: HMRC is coming for your extra income - the government is targeting the little people yet again
3 January 2024, 11:54 | Updated: 3 January 2024, 12:00
- Emma Bradley is a blogger at www.emmaand3.com and www.mumssavvysavings.com and shares money-saving tips on TikTok and Instagram
Side hustles have become much more of an income generator in recent years.
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Whether it is reselling from car boots and charity shops, renting out your spare room, your Etsy venture or some other entrepreneurial sideline many families have been profiteering from the gig economy.
Maybe you started to make a few thousand pounds in order to make ends meet or provide some extra funds for a dream holiday or project, but did you know the rules have changed and it is likely to catch a fair few people out?
From the start of this year the side hustle is no longer viewed as supplementary to your main income – it all needs to be declared to HMRC and with that there are responsibilities including tax!
Technically sellers should have been declaring these earnings before now, but the clampdown means that online digital platforms such as Ebay, Vinted, Airbnb must now share seller information with HMRC making it easier for the tax authorities to find and tax individuals accordingly.
To me this, smacks of the government targeting the little people yet again whilst huge corporations and wealthy individuals are able to play the system with their offshore accounts and clever accounting.
Therefore, if you are making some extra income it has got a whole lot more complicated. You will need to register as a sole trader and submit a tax return each year.
It will be important that you keep records of what you buy and sell and how much profit is made. This income gets added to your overall income – therefore some of us may find our side hustle takes us into another tax bracket meaning that we are paying 40% tax on those profits.
The only positive is that you can offset some of the costs as they affect profit, you can claim the mileage of driving to car boot sales, and you can offset the cost of postage.
If you promote your Airbnb or advertise renting out your drive to commuters these associated costs will be tax deductible.
However, in my opinion, this takes the fun out of our passion projects and instead may feel like a burden rather than providing some fun money. If you are making over £1000 in the year from your side hustle these new changes could affect you.
Many of those using the online platforms to sell are scrapping by as it is – students often sell online in order the manage their finances when studying, or mums that are on maternity or taking a break from work to care for younger children, yet again those trying to be entrepreneurial and exist in a cost of living crisis are being most affected by these new rules. It seems unfair to be targeting average families who are just doing their best in challenging times.
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