Online side hustlers to feel HMRC's wrath?
HMRC will soon start to receive information about the money people make on online selling platforms such as TikTok and Etsy. This has led to panic about a new “side hustle” tax. Who will be affected?
Despite the sensational headlines, no new taxes have been introduced. In fact, it's always been the case that if you are trading, i.e. attempting to make a profit, you may be subject to income tax and NI on those profits. Where profits exceed £1,000, you are required to report the income and expenses to HMRC, via a self-assessment tax return, even if there is no tax to pay. For example, this could be the case if profits are below the personal allowance of £12,570 per annum. For those where the online selling is a secondary income source, the £1,000 de minimis still applies, i.e. if you have earnings from your main job that exceed the personal allowance, you can earn up to £1,000 as a self-employed individual tax free.
If you are using online selling sites, it's important to recognise whether you are trading or not. A quick rule of thumb would be that if you are making a profit, you are likely to be trading. For example, if you are importing goods from China and listing them on Amazon at a higher price, this is clearly a trade and profits exceeding £1,000 are taxable. Likewise, if you are making goods, such as candles, and selling them on Etsy, you are trading. Whereas, if you are selling unwanted gifts, and your second-hand clothes/toys/furniture etc., you are unlikely to be trading and unlikely to be making a profit.
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