Side Hustle Income Reporting

Starting 1 January 2024, significant changes will impact UK taxpayers with side hustle income. Under new rules, HMRC will now receive detailed reports from popular digital platforms like eBay, Airbnb, Etsy, Deliveroo, and Upwork, making it crucial for individuals with side income to understand their reporting obligations. These regulations are part of a broader effort to ensure accurate income reporting across the gig economy, where nearly half of the UK’s population is expected to have a side hustle by 2025.

 

What Counts as Side Hustle Income?

For tax purposes, any income above £1,000 from self-employment or property rentals (such as short-term lets on platforms like Airbnb) is considered taxable. HMRC has set a £1,000 trading allowance, meaning income below this threshold is generally tax-free, but anything above requires reporting through a self-assessment tax return. This allowance also applies to small-scale or “occasional” sellers who meet specific low-income and frequency criteria.

 

New Reporting Obligations for Platforms and Individuals

Under the new rules, digital platforms will collect and report user income directly to HMRC, with the first reports due by 31 January 2025. This new data-sharing initiative, aligned with OECD guidelines, aims to cross-check side hustle income across tax records, reducing discrepancies and identifying unreported earnings. While many taxpayers may have previously operated under the assumption that small-scale sales or services weren’t subject to tax, these changes clarify that regular or profit-oriented activities are taxable if they exceed the trading allowance.

 

Practical Tips for Managing Side Hustle Income

  1. Track Your Earnings and Expenses: Keeping detailed records is essential for reporting accurately. Use the information provided by platforms to verify figures against your records.
  2. Use the Trading Allowance Wisely: You can either use the £1,000 trading allowance or deduct actual expenses, depending on what’s more beneficial. For frequent sellers, calculating both options may reveal the most tax-efficient approach.
  3. Register for Self-Assessment if Needed: If your side hustle income exceeds the allowance, register with HMRC as self-employed and ensure you submit a self-assessment tax return. The deadline for the 2023-24 tax year filing is 31 January 2025.

 

Preparing for Potential Challenges

It’s essential to be aware that digital platforms report earnings on a calendar year basis, which may not align with the UK’s tax year. This difference could complicate calculations, especially for new sellers or those with income from multiple platforms. Additionally, with January being HMRC’s busiest month, it’s advisable to resolve any questions or registration issues well in advance.

 

LITRG warning regarding side hustle income reporting

The Low Income Tax Reform Group (LITRG) is urging HMRC to enhance its outreach regarding new online platform reporting regulations, which will allow HMRC to access extensive data on individual online sales. LITRG highlights the need for clearer communication to inform side hustlers of their obligation to file tax returns, as these changes could impact up to two million people.

 

Need Support Navigating Side Hustle Income Reporting?

If you have questions about side hustle income or self-assessment obligations, Naail & Co Chartered Certified Accountants can help you navigate the process. Get in touch or book a free initial consultation to ensure you’re meeting your tax obligations and making the most of available allowances.

 

For more information, visit

LITRG Online Platforms report

HMRC guidance, Reporting rules for digital platforms

Side Hustle Income Reporting
Side Hustle Income Reporting

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